ValueGuide Dec2015

Value
Guide
December 2015
For Private Circulation only
www.sharekhan.com
2015: Win some; lose some
Intelligent Investing
Regular Features
Products & Services
Traders Edge
Stock Updates
Sharekhan Special
Viewpoints
Report Card
Earnings Guide
PMS
Top Equity Picks
Wealth Creator
MF Picks
Advisory
Technical view
Commodities and Currencies
F&O Insights
December 2015
Sharekhan ValueGuide
CONTENTS
EQUITY
From Sharekhans Desk

Two thousand
and fifteen began
on a high note.
After winning the
majority mandate
in the general
election of May
2014,
the
Narendra Modiled National Democratic Alliance bagged the key states of
Haryana and Maharashtra in the assembly elections in late
2014 and also garnered enough seats in the Jammu & Kashmir
election to become part of the ruling alliance in the state. 06
RESEARCH BASED EQUITY PRODUCTS

Top Picks Basket
Wealth Creator Portfolio
PMS DESK
07
11
ProPrime - Diversified Equity 32

ProTech - Index
Futures Fund
33
ProTech - Trailing Stops
34
37
Top SIP Fund Picks
38
12 REGULAR FEATURES
19 Report Card
20 Earnings Guide
TECHNICALS
Nifty
DERIVATIVES
22 View
23
ADVISORY DESK
MID Trades
COMMODITY
35 Derivative Ideas
35
FUNDAMENTALS
Crude Oil
Gold
Silver
Copper
Lead
24
25
25
25
25
25
26
27
27
27
TECHNICALS
Gold
Silver
Crude Oil
28 Copper
28 Jeera
28 Soya bean
29
29
29
FUNDAMENTALS
USD-INR
EUR-INR
30
30
GBP-INR
JPY-INR
30
30
TECHNICALS
USD-INR
EUR-INR
31 GBP-INR
31 JPY-INR
31
31
Zinc
Nickel
Castor seed
Chana
Soya bean
4
I
CURRENCY
MUTUAL FUNDS DESK

Top MF Picks (equity)
FUNDAMENTALS
Stock Updates
Sharekhan Special
Viewpoints
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disclaimer
Compliance Officer: Ms. Namita Amod Godbole; Tel: 022-6115000; e-mail: compliance@sharekhan.com Contact: myaccount@sharekhan.com
December 2015
REPORT CARD
EQUITY
FUNDAMENTALS
STOCK IDEAS STANDING (AS ON DECEMBER 03, 2015)

COMPANY
CURRENT PRICE AS ON PRICE

RECO
03-DEC-15
TARGET
52 WEEK
HIGH
LOW
ABSOLUTE PERFORMANCE
1M
3M
6M
12M
1M
RELATIVE TO SENSEX
3M
6M
12M
AUTOMOBILES
Apollo Tyres
Ashok Leyland
Bajaj Auto
Gabriel Industries
Hero MotoCorp NEW
M&M
Maruti Suzuki
Rico Auto Industries
TVS Motor
BSE Auto Index
BANKS & FINANCE
Allahabad Bank
Andhra Bank
Axis (UTI) Bank
Bajaj Finance
Bajaj Finserv
Bank of Baroda
Bank of India
Capital First
Corp Bank
Federal Bank
HDFC
HDFC Bank
ICICI Bank
IDBI Bank
LIC Housing Finance
PTC India Financial Services
Punjab National Bank
SBI
Union Bank of India
Yes Bank
BSE Bank Index
CONSUMER GOODS
Britannia NEW
GSK Consumers
Godrej Consumer Products
Hindustan Unilever
ITC
Jyothy Laboratories
Marico^
Zydus Wellness
BSE FMCG Index
IT / IT SERVICES
Firstsource Solutions
HCL Technologies
Infosys
Persistent Systems
Tata Consultancy Services
Wipro
BSE IT Index
CAPITAL GOODS / POWER
Bharat Heavy Electricals
CESC
Crompton Greaves
Finolex Cables
Greaves Cotton
Kalpataru Power Transmission
PTC India
Skipper NEW
Thermax
Triveni Turbines
Va Tech Wabag NEW
V-Guard Industries
December 2015
Buy
Buy
Hold
Buy
Buy
Buy
Buy
Buy
Reduce
158.5
92.0
2480.2
89.5
2617.8
1345.7
4627.1
45.3
283.5
18688.1
201.0
105.0
2750.0
105.0
3250.0
1450.0
4950.0
58.0
250.0
249.8
151.1
99.7
43.2
2656.0 1912.5
106.8
72.0
3260.0 2251.3
1442.1 1092.2
4790.0 3250.0
61.2
34.3
322.3
201.0
20386.4 16689.5
-3.4
2.8
2.8
0.2
5.1
13.4
2.7
2.7
5.6
3.7
-5.6
8.0
13.5
6.8
14.4
20.8
14.6
-0.5
30.5
9.9
-5.9
35.1
12.3
14.2
2.6
13.0
21.3
12.3
28.8
1.8
-29.6
70.8
-2.0
3.2
-16.1
9.4
38.4
14.1
25.4
-0.6
-1.8
4.5
4.5
1.9
6.9
15.2
4.4
4.4
7.4
5.4
-8.2
5.1
10.4
3.9
11.3
17.5
11.5
-3.2
26.9
6.9
-3.1
39.1
15.7
17.6
5.6
16.3
24.9
15.6
32.6
4.8
-24.5
83.3
5.2
10.7
-9.9
17.4
48.6
22.5
34.6
6.7
Hold
Buy
Buy
Buy
Buy
Buy
Hold
Buy
Hold
Hold
Hold
Buy
Buy
Reduce
Buy
Buy
Hold
Buy
Buy
Buy
74.8
67.6
462.5
5540.0
2026.6
171.3
125.3
382.2
42.4
57.1
1200.2
1076.8
265.8
93.2
467.9
40.3
136.4
241.1
168.8
752.1
19538.7
90.0
84.0
652.0
6000.0
2050.0
195.0
148.0
485.0
48.0
75.0
1400.0
1260.0
400.0
76.0
558.0
62.0
156.0
378.0
185.0
930.0
136.7
72.0
101.0
58.5
655.4
445.9
5720.2 3050.0
2160.0 1165.3
228.9
137.2
312.0
123.4
464.8
307.8
78.9
41.5
79.8
52.2
1402.3 1060.1
1128.0
916.0
393.4
247.7
95.7
52.3
526.0
376.3
73.2
37.1
231.5
123.6
336.0
220.2
253.5
129.8
910.0
590.0
23903.8 18009.1
-0.5
4.4
-3.9
6.7
3.3
7.4
-4.0
4.3
-0.3
4.7
-0.8
-0.5
-3.3
7.8
-0.3
-11.5
7.8
3.3
6.8
-2.8
-0.6
-4.2
8.5
-1.5
11.0
14.3
2.5
-2.7
9.3
-9.0
-3.1
7.9
8.3
2.1
63.8
18.6
4.9
7.8
6.1
7.6
13.9
5.8
-22.1
-6.0
-16.3
30.5
35.6
10.8
-30.8
-3.4
-20.6
-17.4
1.7
7.6
-9.7
38.1
20.5
-5.1
-5.8
-8.1
10.3
-11.2
-4.1
-39.4
-19.9
-6.0
80.7
77.6
-18.1
-55.1
6.0
-32.6
-20.5
8.9
15.1
-22.3
27.3
13.3
-26.2
-34.8
-22.3
-19.0
5.7
-6.6
1.1
6.1
-2.3
8.5
5.0
9.2
-2.4
6.0
1.3
6.5
0.9
1.2
-1.7
9.5
1.4
-10.0
9.6
5.0
8.6
-1.2
1.0
-6.9
5.6
-4.2
7.9
11.1
-0.3
-5.3
6.3
-11.5
-5.8
4.9
5.3
-0.7
59.3
15.4
2.0
4.8
3.2
4.6
10.7
2.9
-19.8
-3.2
-13.8
34.4
39.7
14.1
-28.7
-0.5
-18.2
-15.0
4.7
10.8
-7.0
42.2
24.1
-2.3
-3.0
-5.4
13.6
-8.6
-1.3
-34.9
-14.0
0.9
94.0
90.6
-12.1
-51.8
13.8
-27.7
-14.7
16.9
23.6
-16.6
36.7
21.6
-20.8
-30.0
-16.6
-13.1
13.4
0.3
Buy
Buy
Buy
Hold
Buy
Buy
Buy
Buy
2931.9
5960.0
1221.9
816.6
343.4
313.5
425.2
831.0
7933.7
3650.0
6750.0
1460.0
900.0
370.0
360.0
460.0
990.0
1670.0
5425.1
830.0
744.0
294.0
234.4
312.7
730.1
7277.5
-7.1
0.2
-1.2
3.4
3.6
3.2
12.4
-0.4
2.3
-0.8
-2.7
-4.6
0.7
9.2
2.2
7.1
-1.6
5.0
18.6
-4.6
17.5
-0.9
11.9
21.6
2.9
-12.9
5.9
70.5
5.2
30.5
4.9
-2.5
23.8
32.0
5.4
5.0
-5.6
1.8
0.5
5.1
5.3
4.9
14.3
1.3
4.0
-3.5
-5.4
-7.2
-2.0
6.2
-0.6
4.2
-4.3
2.2
22.1
-1.8
21.0
2.1
15.2
25.3
6.0
-10.3
9.1
83.0
12.9
40.1
12.6
4.6
32.9
41.7
13.1
12.8
Buy
Buy
Buy
Buy
Buy
Hold
42.6
851.2
1057.8
660.0
2350.8
572.6
10792.0
52.0
980.0
1240.0
820.0
3000.0
660.0
45.9
24.2
1058.5
707.5
1219.8
932.6
957.1
573.7
2812.1 2332.5
677.6
512.5
11927.5 10124.5
36.2
-1.9
-6.2
2.3
-6.0
0.5
-3.9
56.9
-8.9
-2.6
-5.1
-8.5
4.2
-2.4
42.2
-8.8
8.2
-10.7
-7.8
6.6
2.7
28.7
6.8
2.2
-15.2
-9.6
-0.2
-0.8
38.4
-0.3
-4.7
4.0
-4.5
2.1
-2.3
52.6
-11.4
-5.3
-7.7
-11.1
1.4
-5.1
46.4
-6.0
11.4
-8.1
-5.0
9.7
5.8
38.1
14.7
9.7
-9.0
-3.0
7.1
6.4
Hold
Buy
Hold
Buy
Buy
Buy
Buy
Buy
Hold
Buy
Buy
Buy
168.7
555.0
193.8
250.0
149.3
275.0
65.1
163.6
855.7
108.5
701.3
913.5
220.0
730.0
**
310.0
160.0
325.0
90.0
210.0
955.0
135.0
850.0
1155.0
-13.5
-1.3
16.0
-0.9
5.5
4.3
0.7
5.1
-0.3
1.8
12.6
3.0
-15.9
13.9
20.8
3.1
16.4
13.4
18.1
23.6
-12.0
1.7
3.1
2.1
-30.9
7.9
18.1
3.0
23.7
23.9
1.5
-1.4
-11.6
-0.6
-3.0
0.4
-35.9
-18.3
4.8
-5.1
10.5
57.6
-31.3
54.1
-15.0
0.2
-10.6
-14.6
-12.1
0.3
17.9
0.8
7.3
6.0
2.4
6.8
1.3
3.5
14.5
4.7
-18.2
10.8
17.5
0.2
13.2
10.2
14.9
20.2
-14.5
-1.1
0.3
-0.7
-28.8
11.2
21.6
6.1
27.4
27.6
4.5
1.5
-9.0
2.4
-0.1
3.4
-31.2
-12.3
12.5
1.9
18.6
69.2
-26.2
65.4
-8.8
7.6
-4.1
-8.3
3435.0
6575.0
1459.0
981.0
410.0
342.0
467.0
1130.3
8382.8
300.0
751.7
202.9
306.5
162.6
291.8
102.0
200.0
1318.0
151.8
972.5
1198.0
168.1
452.0
145.3
213.0
112.6
155.1
50.1
97.0
827.0
90.0
615.0
800.0
EQUITY
REPORT CARD
FUNDAMENTALS
STOCK IDEAS STANDING (AS ON DECEMBER 03, 2015)

COMPANY
CURRENT PRICE AS ON PRICE

RECO
03-DEC-15
TARGET
52 WEEK
HIGH
LOW
1897.3
14391.6
2332.4 1691.4
18814.2 14127.6
BSE Power Index

BSE Capital Goods Index
INFRASTRUCTURE / REAL ESTATE
Gayatri Projects
ITNL
IRB Infra
Jaiprakash Associates
Larsen & Toubro
Punj Lloyd
CNX Infra Index
BSE Real Estate Index
OIL & GAS
Oil India
Reliance Ind
Selan Exploration Technology
BSE Oil and gas Index
PHARMACEUTICALS
Aurobindo Pharma
Cipla
Cadila Healthcare
Divi's Labs
Glenmark Pharmaceuticals
Ipca Laboratories
Lupin
Sun Pharmaceutical Industries
Torrent Pharma
BSE Health Care Index
BUILDING MATERIALS
Grasim
The Ramco Cements
Shree Cement
UltraTech Cement
DISCRETIONARY CONSUMPTION
Century Plyboards (India) NEW
Cox and Kings NEW
Inox Leisure NEW
Info Edge (India) NEW
KDDL NEW
KKCL
Orbit Exports EW
N
Raymond
Relaxo Footwear
Speciality Restaurants
Thomas Cook India
Wonderla Holidays NEW
Zee Entertainment
DIVERSIFIED / MISCELLANEOUS
Aditya Birla Nuvo
Bajaj Holdings
Bharti Airtel
Bharat Electronics
Gateway Distriparks
Max India
Ratnamani Metals and Tubes
Supreme Industries
United Phosphorus
BSE500 Index
CNX500 Index
CNXMCAP Index
-0.1
-2.1
9.8
-6.2
1M
RELATIVE TO SENSEX
3M
6M
12M
-6.0
-13.4
-8.8
-10.3
1.5
-0.5
6.8
-8.8
-3.2
-10.8
-2.1
-3.7
Hold
Buy
Buy
Hold
Buy
Reduce
736.8
87.1
247.1
12.9
1347.9
27.3
2729.3
1354.0
752.0
175.0
300.0
26.0
1630.0
**
766.6
224.0
275.9
30.4
1893.8
42.5
3456.8
1894.0
132.1
84.0
197.1
7.9
1325.6
20.0
2678.2
1142.7
6.4
-3.9
1.2
0.0
-2.5
8.6
-2.7
-2.5
82.4
-1.6
14.1
40.8
-11.4
10.8
-2.4
9.9
274.6
-41.6
2.2
-21.3
-18.3
15.7
-13.6
-9.5
401.4
-50.7
-6.2
-56.4
-16.6
-24.9
-14.1
-18.7
8.2
-2.3
2.9
1.7
-0.9
10.4
-1.1
-0.9
77.4
-4.3
10.9
36.9
-13.8
7.8
-5.1
6.9
285.7
-39.8
5.3
-18.9
-15.8
19.1
-11.0
-6.8
438.2
-47.1
0.7
-53.2
-10.4
-19.3
-7.8
-12.8
Buy
Buy
Hold
386.5
977.2
242.1
9366.2
530.0
1100.0
345.0
594.9
1067.9
449.6
10768.2
341.1
796.5
202.7
8243.3
-4.0
1.9
6.6
4.0
-13.3
15.1
7.0
10.5
-17.2
8.8
-3.5
-0.3
-30.3
2.7
-34.1
-8.4
-2.4
3.6
8.3
5.7
-15.7
12.0
4.1
7.5
-14.7
12.1
-0.7
2.6
-25.2
10.3
-29.2
-1.7
Hold
Buy
Buy
Hold
Hold
Hold
Buy
Buy
Buy
820.8
651.2
403.6
1126.7
958.0
765.0
1821.7
726.9
1470.0
16437.1
973.0
795.0
515.0
1150.0
1065.0
779.0
2207.0
980.0
1570.0
861.6
752.9
454.4
1242.4
1262.9
888.0
2129.0
1200.8
1720.0
18842.7
465.0
571.3
285.0
786.0
702.6
591.3
1342.4
704.0
965.0
15345.7
-2.6
-3.2
-1.0
-1.5
-0.5
0.2
-1.5
-15.4
-3.4
-7.4
13.2
1.6
10.3
1.1
-9.1
-3.7
-0.5
-17.5
-8.7
-5.2
24.8
3.0
10.5
26.8
13.9
18.5
4.3
-14.7
23.2
3.3
43.9
3.2
28.4
32.7
20.3
11.2
27.1
-12.6
30.1
11.2
-1.0
-1.6
0.7
0.1
1.2
1.8
0.1
-14.0
-1.8
-5.8
10.1
-1.2
7.3
-1.6
-11.6
-6.3
-3.2
-19.8
-11.2
-7.8
28.5
6.0
13.8
30.6
17.3
22.0
7.4
-12.2
26.9
6.3
54.4
10.8
37.8
42.4
29.1
19.3
36.4
-6.2
39.6
19.3
Buy
Buy
Hold
Buy
3744.1
380.0
11300.0
2859.4
4475.0
450.0
11800.0
3750.0
4024.9
384.9
13360.0
3399.0
3301.0
270.0
8700.0
2418.3
1.8
4.3
-8.1
-2.7
10.6
21.0
3.9
-1.3
7.8
16.5
0.1
-1.8
7.5
14.0
27.1
15.5
3.5
6.0
-6.5
-1.1
7.6
17.7
1.0
-4.0
11.0
20.0
3.1
1.1
15.4
22.3
36.4
24.0
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Hold
Buy
Hold
Buy
Buy
Buy
190.6
245.9
245.3
859.7
331.2
1975.0
373.0
417.3
486.1
118.0
204.2
365.6
409.9
240.0
300.0
307.0
1000.0
360.0
2480.0
600.0
450.0
635.0
145.0
265.0
430.0
470.0
262.0
344.0
276.3
965.0
424.5
2342.7
495.0
579.5
615.0
218.8
256.9
404.5
440.7
137.0
200.1
138.7
697.1
196.0
1624.1
302.2
360.1
246.0
114.0
150.2
240.2
299.5
6.7
-9.0
10.4
16.1
16.7
-6.1
-5.4
-1.3
-5.0
-12.4
-0.3
8.6
0.2
33.2
4.7
7.6
16.4
28.0
-8.0
2.5
7.2
-2.3
-16.3
2.2
30.4
14.6
-3.4
-14.7
52.4
12.4
7.5
-0.2
1.3
-5.9
18.7
-23.0
-13.1
37.8
27.1
19.6
-11.3
40.8
-5.7
34.6
10.7
-4.2
-21.1
103.4
-34.6
18.8
23.3
9.0
8.5
-7.5
12.2
18.0
18.6
-4.5
-3.9
0.3
-3.4
-11.0
1.4
10.4
1.9
29.5
1.8
4.6
13.2
24.4
-10.5
-0.3
4.2
-4.9
-18.6
-0.6
26.8
11.5
-0.5
-12.1
57.0
15.8
10.7
2.8
4.3
-3.1
22.3
-20.8
-10.5
41.9
30.9
28.4
-4.8
51.2
1.2
44.4
18.8
2.8
-15.4
118.3
-29.8
27.5
32.4
17.0
Buy
Buy
Hold
Buy
Buy
Buy
Hold
Hold
Buy
2101.5
1725.0
319.6
1223.4
327.8
539.4
566.7
662.4
421.4
10516.6
6649.5
13287.4
2500.0
1950.0
380.0
1450.0
385.0
648.0
670.0
700.0
550.0
2344.9
1747.8
452.5
1386.7
459.4
586.0
806.3
746.8
576.4
11764.8
7428.1
14237.6
1516.0
1206.5
315.6
850.4
300.5
357.9
504.0
540.0
299.5
9931.9
6286.7
11470.0
3.1
3.3
-7.8
-1.0
-0.9
0.2
-12.2
3.2
-7.3
-0.5
-0.6
1.2
7.4
11.4
-5.9
11.6
-1.8
8.8
-4.5
9.0
-20.0
3.8
3.7
5.2
22.1
33.5
-22.3
5.9
-10.7
10.2
-2.7
-1.8
-19.3
-0.6
-0.5
4.6
20.4
24.6
-15.5
46.5
6.5
43.1
-2.0
6.5
24.3
-1.8
-1.6
8.4
4.8
5.0
-6.3
0.6
0.7
1.8
-10.8
4.9
-5.8
1.1
1.1
2.9
4.5
8.3
-8.5
8.6
-4.5
5.8
-7.1
6.0
-22.2
0.9
0.8
2.3
25.8
37.5
-20.0
9.0
-8.0
13.5
0.2
1.2
-16.9
2.3
2.5
7.7
29.3
33.7
-9.3
57.2
14.3
53.6
5.2
14.3
33.4
5.4
5.7
16.3
In Top Picks basket
ABSOLUTE PERFORMANCE
1M
3M
6M
12M
** Price target under review
December 2015
from sharekhans desk
FROM SHAREKHANS DESK
December 2015

Two thousand and fifteen began on a high note. After winning the majority mandate in the
general election of May 2014, the Narendra Modi-led National Democratic Alliance bagged
the key states of Haryana and Maharashtra in the assembly elections in late 2014 and also
garnered enough seats in the Jammu & Kashmir election to become part of the ruling alliance
in the state.
No wonder, a lot was expected from the government on the policy front, given its strong
position and political capital gained in 2014. Backed by policy activism and improving macro
conditions, the economy was expected to revive sooner than later and start reflecting on corporate
earnings from FY2016 itself.
However, the hopes were belied in 2015. Key policy bills are stuck in the upper house of the
Parliament where the new government lacks a brute majority and has been unable to form a
political consensus to push through the reforms. Perhaps the government also underestimated
the extent of the economic damage and the complexity of repairing the economy. On the other
hand, market participants are guilty of building unrealistic hopes of a quick recovery in the
economy.
But all is not lost yet. The government on its part has taken several executive decisions that are
reviving and revitalising certain pockets of the economy, like the road, power transmission and
distribution, and mining sectors, and addressing the ills of the power sector (including the
restructuring of the state electricity boards). Additionally, the government has made efforts to
streamline the delivery of subsidies and other rural schemes (thereby reducing the leakage) and
moderated the hike in the support prices for the procurement of agricultural produce to control
structurally high inflationary trends. This has not only resulted in a better fiscal health but also
provided enough room to the Reserve Bank of India to reduce the policy rates by 125 basis
points in the last one year.
Consequently, the macro conditions have distinctly improved in 2015 and built the right base
for the economy. At the same time, the expectations have mellowed significantly now. It is
clearly visible in the 12-14% cut in the consensus estimate of the Sensex earnings over FY2016
and FY2017. On the policy front, the government has turned more flexible and receptive to the
demand of the opposition parties in a bid to make progress on the key reforms including the
Goods and Services Tax (GST) Bill. The rationalisation of the indirect tax regime under the
GST could potentially add 1.0-1.5% to Indias gross domestic product (GDP) growth in the
coming years.
Globally, the dynamics are set to change after a status quo for the past seven years. Within the
developed economies, the USA would begin tightening its monetary policy with a rate hike in
the forthcoming policy meet. On the other hand, Europe, China and Japan are likely to pursue
a very accommodative policy stance in the foreseeable future. The move could cause gyrations
in the financial markets especially the foreign exchange and emerging equity markets.
However, past experience (including the recent event of the withdrawal of quantitative easing
to the tune of $85 billion per month by the USA) shows that the markets quickly adjust to
changes and volatility is seen more during the run-up to an event rather than after it. Moreover,
India is much better placed now to face any global upheaval. As compared to being part of the
Fragile Five group of stressed economies India is seen as one of the few bright spots globally
today, thanks to the good work done by the new government and a very capable economist at
the helm of the RBI.
Importantly for investors, the macro situation is better than the last years. The government is
reaching out to the opposition parties to build a political consensus to push through reforms.
Corporate earnings would look up on a low base effect and a gradual reflection of the improved
macros in the business momentum. Plus, valuations are comfortable. An ideal set-up for stock
pickers and long-term investors!
6
EQUITY
SHAREKHAN TOP PICKS
FUNDAMENTALS
SHAREKHAN TOP PICKS
Sharekhan Top Picks

Benchmark indices continued to move in a narrow range with a
negative bias in November of 2015. The unfavourable results of Bihar
state elections and lacklustre Q2FY2016 performance of corporates
were the key concerning factors locally. The rising probability of a
rate hike in the USA and the surge in volatility in the Chinese market
added to the weakness in market sentiment.
earlier in the month. Consequently, we had replaced DRL with Godrej

Consumer Products on an intra-month basis. Excluding the impact
of DRL the Top Picks basket declined by 0.7% during the last month.
We are not making any change in the Top Picks basket for the eventful
month of December. In the next month, central bankers would be in
focus with the scheduled review meeting of the Reserve Bank of India
in India and that of the US Federal Reserve and European Central
Bank in the two developed regions of the world. Expectations are
also building up from the ongoing winter session of the Parliament
since the government has reached out to the opposition parties for
the passage of the Goods and Services Tax Bill and other critical
pending reforms.
The benchmark indices, Nifty and Sensex, ended the month with a
loss of 1.6% and 1.9% respectively since our last revision of the Top
Picks basket on October 31, 2015. The Top Picks basket performed
in line with the benchmark indices with a decline of 1.9% in the
same period. However, it should be noted that this was despite a
dent of close to 15% taken in Dr Reddys Laboratories (DRL) after
the unexpected warning letter for three of its manufacturing plants
CONSISTENT OUTPERFORMANCE (ABSOLUTE RETURNS; NOT ANNUALISED)
1 month
3 months
(%)
6 months
1 year
3 years
5 years
120.0
Top Picks
-1.9
2.4
0.7
16.3
114.9
Sensex
-1.9
-0.5
-6.1
-8.6
35.5
31.0
Nifty
-1.6
-0.4
-6.0
-7.2
35.2
32.6
CNX Mid-cap
0.1
1.4
0.5
7.2
62.9
48.2
ABSOLUTE RETURNS (TOP PICKS VS BENCHMARK INDICES)

Sharekhan
(Top Picks)
Sensex
Nifty
CONSTANTLY BEATING NIFTY AND SENSEX (CUMULATIVE RETURNS) SINCE

APRIL 2009
CNX
MIDCAP
YTD CY2015
13.8
-5.0
-4.2
5.3
CY2014
63.6
29.9
30.9
55.1
CY2013
12.4
8.5
6.4
-5.6
CY2012
35.1
26.2
29.0
36.0
CY2011
-20.5
-21.2
-21.7
-25.0
CY2010
16.8
11.5
12.9
11.5
CY2009
116.1
76.1
72.0
114.0
Since inception
(Jan 2009)
422.7
160.5
160.3
265.7
Please note the returns are based on the assumption that at the beginning of each month an equal amount was invested in each stock of the Top Picks basket
NAME
Ashok Leyland
CMP*
(RS)
FY15
PER
FY16E
FY17E
FY15
ROE (%)
FY16E
FY17E
PRICE
TARGET (RS)#
UPSIDE
(%)
11
95
115.1
27
17.3
4.9
18.3
24.8
105
Bajaj Finance
5,505
30.8
25
19.5
20.3
19.5
19.2
6,000
Britannia Industries
2,917
64.5
41
33.8
53.3
55.9
47.5
3,650
25
Cadila Healthcare
398
35.5
26.3
19.3
27.3
28.4
29.3
515
30
1,245
45.9
37.2
30.2
24.6
25.7
25.8
1,460
17
932
27.6
22.2
17.5
19.2
20.5
21.5
1,108
19
4,559
37.1
25.5
20.1
16.6
20.8
22.2
4,950
Relaxo Footwear
510
59.3
45.9
34.0
22.1
22.3
24.9
635
25
Reliance Industries
969
12.1
12.4
10.4
10.8
9.7
10.5
1,100
14
SBI
249
14.2
10.4
7.8
10.6
13.2
15.7
378
52
TCS
2,371
87.5
70.8
57.5
33.7
32.7
29.7
3,000
27
410
4.1
3.3
3.0
19.0
18.8
20.6
470
15
GCPL
IndusInd Bank
Maruti Suzuki
Zee Entertainment
*CMP as on November 30, 2015 # Price target for next 6-12 months
** Under review
December 2015
EQUITY
NAME
FUNDAMENTALS
CMP
(RS)
ASHOK LEYLAND
95
FY15
115.1
SHAREKHAN TOP PICKS

PER
FY16E
27
FY17E
FY15
ROE (%)
FY16E
FY17E
17.3
4.9
18.3
24.8
PRICE
TARGET (RS)
105
UPSIDE
(%)
11
Remarks: Ashok Leyland Ltd (ALL) is the second largest commercial vehicle (CV) manufacturer in India with a market share of 27% in the heavy
truck segment and an even higher share of about 40% in the bus segment. The domestic heavy CV industry witnessed a sharp fall in
volumes over FY12-14 given an economic slowdown. The industry witnessed a turnaround in FY15 with a 16% growth.
ALL entered the light commercial vehicle (LCV) segment with the launch of the Dost in joint venture (JV) with Nissan. The JV has
additionally launched the Partner LCV and Stile van. Going forward, we expect ALL to gain a foothold in the LCV segment and expand
its market share.
The company is also concentrating on verticals other than CVs to de-risk its business model. It has a strong presence in exports and
continues to expand in newer geographies. Additionally, ALLs defence business is expected to get a leg-up due to the governments
focus on indigenous manufacture of defence products and FDI in the sector.
ALLs operating profit margin has recovered from the lows on the back of a reduction in discounts and price hikes taken by the
company. Its margins are expected to expand further, given the operating leverage. In FY15, ALL raised Rs660 crore via a qualified
institutional placement and sold non-core assets to pare its debts. With no significant capital expenditure planned, we expect the
balance sheet to get de-leveraged and the return ratios to improve.
BAJAJ FINANCE
5,505
30.8
25
19.5
20.3
19.5
19.2
6,000
Remarks: Ashok Leyland Ltd (ALL) is the second largest commercial vehicle (CV) manufacturer in India with a market share of 27% in the heavy
truck segment and an even higher share of about 40% in the bus segment. The domestic heavy CV industry witnessed a sharp fall in
volumes over FY12-14 given an economic slowdown. The industry witnessed a turnaround in FY15 with a 16% growth.
ALL entered the light commercial vehicle (LCV) segment with the launch of the Dost in joint venture (JV) with Nissan. The JV has
additionally launched the Partner LCV and Stile van. Going forward, we expect ALL to gain a foothold in the LCV segment and expand
its market share.
The company is also concentrating on verticals other than CVs to de-risk its business model. It has a strong presence in exports and
continues to expand in newer geographies. Additionally, ALLs defence business is expected to get a leg-up due to the governments
focus on indigenous manufacture of defence products and FDI in the sector.
ALLs operating profit margin has recovered from the lows on the back of a reduction in discounts and price hikes taken by the
company. Its margins are expected to expand further, given the operating leverage. In FY15, ALL raised Rs660 crore via a qualified
institutional placement and sold non-core assets to pare its debts. With no significant capital expenditure planned, we expect the
balance sheet to get de-leveraged and the return ratios to improve.
BRITANNIA INDUSTRIES
2,917
64.5
41
33.8
53.3
55.9
47.5
3,650
25
Remarks: Britannia Industries (Britannia) is the second largest player in the Indian biscuit market with about 30% market share. It has chalked
out an aggressive growth strategy to sustain the double-digit volume growth in the biscuit segment by enhancing its product portfolio.
It is also striving to expand to the other categories such as dairy (market size Rs75,000) and adjacent snacking categories (market size
Rs30,000 crore).
It is likely to maintain a 14-15% revenue growth rate with the volume growth standing at 10-11% (largely driven by enhanced both
distribution reach and product portfolio). The operating profit margin is expected to remain in the range of 14-15% on the back of
benign input cost and operating efficiency.
The company has a strong balance sheet with the free cash flow consistently improving over the past few years. Its return ratios have
improved over the past few years and remained strong in the upward of 50%.
Under a new leadership, Britannia has been able to leverage and monetise its strong brand and position in the biscuit and snack
segments. We believe that the company can sustain its higher than industry growth rates with an improving distribution reach, entry
into newer categories and focus on cost efficiency. We recommend a Buy on the stock with a price target of Rs3,650.
CADILA HEALTHCARE
398
35.5
26.3
19.3
27.3
28.4
29.3
515
30
Remarks: Cadila Healthcare is set to enter a high-growth trajectory, thanks to its aggressive product filings in the USA and Latin America, a
recovery in its joint venture business and the launch of niche products in the Indian market including the generic version of Gilead
Sciences' Hepatitis C drug, Sofosbuvir, in India under the brand name SoviHep.
Cadila Healthcare, which generates close to 36% of its total revenues from the US market, is likely to be among the key beneficiaries of
a favourable business environment in the generic space. The company has over 161 abbreviated new drug applications (ANDAs) pending
approval out of 260 ANDAs filed with the US Food and Drug Administration (USFDA) that will unfold over the next two to three years.
We expect the company to record overall revenue and profit CAGR of 21% and 39% over FY2015-17 respectively from the base
business. The OPM of the company will see a sustained expansion of over 400BPS in the next two years, mainly on the back of
stronger traction in the branded business in India and Latin America, a better generic pricing scenario in the USA and optimisation of
capabilities in the joint venture business.
December 2015
EQUITY
SHAREKHAN TOP PICKS

NAME
CMP
(RS)
GODREJ CONSUMERS
1,245
FY15
45.9
PER
FY16E
37.2
FY17E
FY15
ROE (%)
FY16E
FY17E
30.2
24.6
25.7
25.8
FUNDAMENTALS
PRICE
TARGET (RS)
1,460
UPSIDE
(%)
17
Remarks: Godrej Consumer Products Ltd (GCPL) is one of the largest FMCG companies in India with a strong portfolio of brands catering to the
matured and fast growing categories in the domestic market. With a slew of acquisitions in markets such as Africa, Latin America and
Indonesia, it has expanded its base globally (about 40% of its revenues come from the international market.
GCPL's domestic business is performing well in a weak demand environment (grew by 9% in Q2FY2016). The key reason for a better
performance is a presence in the under-penetrated categories such as hair color and mosquito repellent, sustained innovation in the
portfolio and expansion in distribution reach. On the other hand, the business in Africa is in a consolidation phase while the Indonesian
business is standing tall in a favourable demand environment.
Benign input prices would continue to boost its profitability and help GCPL to take adequate promotional actions and do higher brand
investment in a weak demand environment.

GCPL's long-term growth prospects remain intact and we expect its earnings to grow at a CAGR of above 20% over the next two to
three years. Thus, better growth prospects and strong earning visibility make it one of the better picks in the mid-cap FMCG space. We
maintain our Buy recommendation on the stock.
INDUSIND BANK
932
27.6
22.2
17.5
19.2
20.5
21.5
1,108
19
Remarks: IndusInd Bank is among the fastest growing banks (a 27% CAGR growth over FY10-15) having a loan book of Rs68,700 crore and 811
branches across the country. About 25% of the banks book pertains to vehicle finance, which is a high-yielding category and is
showing signs of recovery.
Given the aggressive measures taken by the management, the deposit profile has improved considerably (a CASA ratio of 34%).
Going ahead, the bank would follow a differentiated branch expansion strategy (a 5% branch market share in identified centers) that
would help ensure healthy savings accounts and retail deposit growth.
Despite a weak economic growth and a higher proportion of vehicle finance book the bank has maintained its asset quality. With total
stressed loans (restructured loans + gross NPAs) forming just 1.4% of the book, the banks asset quality is among the best in the system.
A likely revival in the economy will further fuel growth in the consumer finance division and strong capital ratios will support the growth
plans. The stock is trading at 3.3x its FY17E book value (not factoring in the QIP issue). Given the strong loan growth, high RoAs and
healthy asset quality, the stock should continue to trade at premium valuation. We have a positive outlook on the stock.
MARUTI SUZUKI
4,559
37.1
25.5
20.1
16.6
20.8
22.2
4,950
Remarks: Maruti Suzuki India Ltd (MSIL) is the market leader in the domestic passenger vehicle (PV) industry. In FY2015, as against an industry
growth of a modest 3.9% MSIL has grown its volumes by 11.1% and in the process expanded its market share by 441BPS to 45%.
The company further strengthened its sales and service network, and added 309 outlets in FY15. Additionally, the drive undertaken by
its management to tap the potential in rural areas paid rich dividends in difficult times for the industry and in the face of rising competitive
intensity; this reaffirms the resilience of MSILs positioning and business model.
MSILs new sedan, Ciaz, has received a positive response from the market and helped MSIL establish a presence in the segment.
Also, with the new premium cross-over, ie S-Cross (to be retailed at exclusive Nexa outlets) the company is looking to move up the
ladder. Further, the recent launch of the new premium hatchback, ie Baleno, which has been priced aggressively as compared with
peers, is expected to help further gain market share. MSIL has a pipeline of new launches over the next few years, with the most
important being the entry into the compact utility vehicle and light commercial vehicle segments.
We expect customer sentiment to improve on the back of a strong government at the centre. Additionally the PV segment is expected
to benefit from the pent-up demand over the past two years; this will benefit MSIL the most due to its high market share in the entry
level segment.
RELAXO FOOTWEAR
510
59.3
45.9
34.0
22.1
22.3
24.9
635
25
Remarks: Relaxo Footwear is present in the fast-growing footwear category, wherein it caters to customers with its four top-of-the-mind-recall
brands, viz, Hawaii, Sparx, Flite and Schoolmate. In the last quarter it also added another brand, Bahamas, to its product portfolio.
Relaxo has a proactive approach towards both brand building and creating capacities. To build its brand and create pull, like FMCG
players it continues to rope Bollywood celebrities and this creates an aspirational quotient for its brands. On the one hand, the
company is creating strong consumer centric aspiration for the consumers; on the other hand, it is keeping its eye on quality and thus
does not believe in outsourcing. It is in the process of building capacity for future. Despite the current capacity (180 million pieces per
annuam) that would take care of growth in the next three years, the company has bought a 15-acre land at Bhiwadi to built additional
capacity to serve the future requirements.
Relaxos strong presence in the lucrative mid priced footwear segment (through its top-of-the-mind-recall brands like Hawaii, Flite and
Sparx) along with its integrated manufacturing set-up, lean working capital requirement and vigilant management puts it in a sweet
spot to cash in on the strong growth opportunity unfolding in the footwear category due to a shift from unbranded to branded products.
We thus maintain our Buy rating on the stock. We also roll over our multiple from FY2017 estimate to FY2018 estimate (valuing the
stock at 33x FY2018E) with a price target of Rs635.
December 2015
EQUITY
NAME
FUNDAMENTALS
CMP
(RS)
RELIANCE INDUSTRIES
969
FY15
12.1
SHAREKHAN TOP PICKS

PER
FY16E
12.4
FY17E
FY15
ROE (%)
FY16E
FY17E
10.4
10.8
9.7
10.5
PRICE
TARGET (RS)
UPSIDE
(%)
1,100
14
Remarks: Reliance Industries Ltd (RIL) has a strong presence in the refining, petrochemical and upstream exploration businesses. The refining
division of the company is the highest contributor to its earnings and is operating efficiently with a better gross refining margin (GRM)
compared with its peers in the domestic market due to the ability of its plant to refine more of heavier crude. The exploration business
remains weak due to low production in the Krishna-Godavari-D6 (KG-D6) field and weak pricing of global fuel prices. However, capital
employed and profit contribution from the exploration business is low.
Moreover, the upcoming incremental capacities in the petrochemical and refinery businesses are going to drive the future earnings growth
substantially as the downstream businesses are on the driving seat and contributing the lions share of the profitability and cash flow.
After a strong GRM in H1FY2016, we expect the GRM to remain healthy for the whole year. The stock is available at an attractive
valuation considering the size, strong balance sheet and cash flow generating ability of the company.
SBI
249
14.2
10.4
7.8
10.6
13.2
15.7
378
52
Remarks: SBI is India's largest bank in terms of most comparable parameters such as assets size, branch network (18,000 branches) and
customer base. The bank has a market share of ~18% and along with its associate banks it commands a market share of over 25% in
the banking system. Therefore, with a revival in the investment cycle and pick-up in consumption the bank is likely to benefit significantly
in terms of loan growth and profitability.
SBIs asset quality is relatively better compared with the other public sector banks (PSBs; its stressed loans stand at ~8.5% vs ~13.5%
of the other PSBs) and has been showing improving trends in the past few quarters. While the pressure on the asset quality may
continue in the near term, a higher tier-1 CAR (9.6%) and an improving operating performance remain comforting factors.
Going ahead, SBI will look to merge its associate banks which will give an unmatched hold in the domestic banking sector and boost
economies of scale. In addition, the likely monetisation of the insurance and other subsidiaries will strengthen the capital position of
the bank. The bank may also benefit from the governments plans to infuse capital into the PSBs. SBI is a better pick among the
government-owned banks and is reasonably valued at the current levels.
TCS
2,371
87.5
70.8
57.5
33.7
32.7
29.7
3,000
27
Remarks: TCS pioneered the IT services outsourcing business from India and is the largest IT service firm in the country. It is a leader in most
service offerings and has further consolidated its position as a full-service provider by delivering a robust financial and operational
performance consistently over the years.
The consistency and predictability of its earnings performance has put the company at the top of its league. TCSs management
remains positive on the digital technologies space, which grew by 10.7% QoQ, forms 13.3% of the revenues as compared with 12.5%
in Q1FY2016. The management remains confident about the growth trajectory of the digital space for the coming years. Given the
usual seasonal weakness in H2, it expects a soft revenue growth in the next two quarters. Further, it expects weakness in Diligenta
(insurance) and Japan (integration issues related to the Mitsubishi acquisition) to continue for few more quarters.
We remain positive on TCS, given its strong positioning, scale advantage and head start in the digital technologies space (the highest
among the top Indian IT companies), which justify the valuation premium for TCS over the others.
ZEE ENTERTAINMENT
410
4.1
3.3
3.0
19.0
18.8
20.6
470
15
Remarks: Among the key stakeholders of the domestic TV industry, we expect the broadcasters to be the prime beneficiary of the mandatory
digitisation process initiated by the government. The broadcasters would benefit from higher subscription revenues at the least incremental
capex as the subscriber declaration improves in the cable industry.
The management maintains that the advertisement spending will continue to grow in double digits going ahead and ZEEL will be able
to outperform the same. The growth in the advertisement spending will be driven by an improvement in the macro-economic factors
and the fact the ZEEL is well placed to capture the emerging opportunities being a leader in terms of market share.
ZEEL continues to outperform the broadcasting advertising market. We expect the momentum to continue with an improvement in the
macro economy. The management indicated the strong momentum in the advertisement revenue growth would continue led by market
share gains and improvement in spending from segments like FMCG, e-commerce, consumer durables and telecom companies.
Subscription revenues are also expected to benefit from the run-up phases III and IV of the digitisation process (to be more visible in
FY2017 and FY2018). We continue to see ZEEL as the prime beneficiary of the macro revival and digitisation.
December 2015
10
EQUITY
WEALTH CREATOR PORTFOLIO
WEALTH CREATOR PORTFOLIO
FUNDAMENTALS
NOVEMBER 30, 2015
Wealth Creator portfolio

Objective: To build a balanced and actively managed portfolio of
quality companies that will help create meaningful wealth for
investors in the multi-year rally expected in the Indian equity market.
Portfolio performance review
In addition to some bottom-up picks, the portfolio contains stocks

identified based on three key themes:
Policy push: Stocks from sectors benefiting from improvement

in the policy environment
Wealth Creator folio has appreciated by 9% (weighted average

returns) since its inception comprehensively beating the returns
from the benchmark indices.
No changes/revisions suggested in the folio in the Month of
November 2015. Price as on on November 30, 2015.
Early gainers: Beneficiaries of an economic recovery (stocks from

auto, banking & financial services, logistic sectors)
Evergreen: Steady performers that provide stable and consistent

returns including urban consumption plays
COMPARATIVE RETURNS
Particulars
Returns (as on on November 30, 2015)

Since inception (August 21, 2014)
Wealth Creator folio (weighted average returns)
9.0
- Large-cap (64%)
9.3
- Mid-cap (36%)
8.3
Sensex
-0.8
Nifty
2.1
CNX Mid-cap
UPDATE ON WEALTH CREATOR PORTFOLIO
Sr No
Scrip
18.5
Weights
Reco price (Rs)

30-Oct-2015
Price target (Rs)

March-18
Potential upside
Large-caps (64% weightage; 8% each))

1
Axis Bank
8%
469
1210
158.1%
Larsen & Toubro
8%
1374
3800
176.6%
Maruti Suzuki
8%
4577
8750
91.2%
Cummins
8%
990
1708
72.6%
State Bank of India
8%
250
580
131.6%
Sun Pharmaceutical
8%
731
1650
125.8%
Tata Consultancy Services
8%
2365
5100
115.6%
Tata Motors DVR
8%
297
675
127.0%
PTC India Financials
4%
41
112
175.9%
Mid-caps (36% weightage; 4% each)

10
V-Guard
4%
925
2100
127.1%
11
Gateway Distripark
4%
342
810
137.1%
12
IRB Infra
4%
255
650
155.2%
13
Network 18 Media
4%
52
135
161.9%
14
Gabriel India
4%
89
200
124.0%
15
Century Plyboard
4%
192
440
129.1%
16
Triveni Turbines
4%
109
265
142.2%
17
Dhanuka Agritech
4%
491
1150
134.4%
* Please note we see scope for upward revision in target price (3-year) of some of the stocks depending on the extent of economic recovery and will keep updating on the same
11
December 2015
STOCK UPDATE
EQUITY
FUNDAMENTALS
ANDHRA BANK
BUY
CMP: RS67
NOVEMBER 20, 2015
Improved performance; upgraded to Buy
with PT revised to Rs84
COMPANY DETAILS
Price target:
Rs84
Market cap:
Rs4,351 cr
52 week high/low:
Rs101/59
KEY POINTS
NSE volume (no. of shares):
21.8 lakh
BSE code:
532418
NSE code:
ANDHRABANK
Sharekhan code:
ANDHRABANK
Healthy operating performance: For Q2FY2016, Andhra Bank reported a 73.9% Y-o-Y
growth in net profit supported by a strong uptick in non-interest income (up 43.5% YoY).
The operating performance was also healthy as net interest income grew by 17.9% YoY
backed by improved loan growth and expansion in margins (up 27BPS YoY to 3.2%).
Free float (no. of shares):
23.50 cr
Slippages rise in Q2 but mostly offset by higher recoveries/write-offs: The banks reported
NPA ratio improved Q-o-Q despite higher slippages (Rs1,193 crore vs Rs765 crore in
Q1FY2016) due to higher recoveries and write-offs (Rs468 crore and Rs490 crore
respectively). While restructured loans at 11% of loans (~8.5% of book excluding state
discom loans) remains higher than peers, the management expects lesser chances of chunky
slippages over the next couple of quarters. The provision coverage ratio has improved to
63.0% from 61.3% in Q1FY2016.
SHAREHOLDING PATTERN
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-4.6
-13.1
-13.0
-20.3
Relative to Sensex
0.9
-6.4
-8.0
-14.8
Sharekhan Limited, its analyst or dependant(s) of the analyst might be

holding or having a postition in the companies mentioned in the article.
Valuations reasonable, upgrade to Buy: Andhra Banks operating performance has turned
out to be better on account of improved loan growth, expansion in margins and CASA
ratio. The asset quality though remains a concern for most PSU banks including Andhra
Bank but its current valuation (0.4x its FY2016E BV and 0.7x its FY2016E BV) partly
factors in the same. The capital position has improved after the recent capital infusion by
the government (tier-I CAR at 8.2%). We have revised our estimates to factor in higher
provisions and expect RoA (0.6%) to be reasonable compared with its peers. We, therefore,
have upgraded the rating to Buy with a revised price target of Rs84.
Key risk: Any large-ticket slippages could affect the earnings and valuation outlook.
For detailed report, please visit the Research section of our website, sharekhan.com.
ASHOK LEYLAND
BUY
CMP: RS87
NOVEMBER 5, 2015
Strong operating performance; Buy maintained
with revised PT of Rs105
COMPANY DETAILS
Price target:
Rs105
Market cap:
Rs24,702 cr
52-week high/low:
Rs100/43
KEY POINTS
1.89 cr
BSE code:
500477
NSE code:
ASHOKLEY
Sharekhan code:
ASHOKLEY
141.2 cr
Strong operational performance; PAT falls short of expectations: Ashok Leyland Ltd (ALL)
maintained industry leading growth and outperformed with a growth of 78% as against the
industry growth of 43.6%. The combined effect of price hikes undertaken, significant
operating leverage and favourable commodity prices led to a 475-BPS OPM expansion
(YoY) to 12%. An exceptional gain of Rs151.8 crore (sale of IndusInd Bank shares) was
negated by a diminution in value of investment (in John Deere JV) of Rs157 crore. Adjusted
for these exceptional items the profit for the quarter stood at Rs292 crore, below our estimate
of Rs317 crore.
Positive outlook: The domestic MHCV segment has witnessed a strong growth of 33.6% in
H1FY2016 albeit benefitting from the pre-buying in September ahead of the implementation
of the new safety norms. We expect demand to be slightly tepid in Q3FY2016 and a strong
pick-up is expected in Q4FY2016 during the peak season. Bharat Stage IV (BSIV) norms
will be implemented phase-wise across the country by April 2017. We expect pre-buying
ahead of the new emission norms to keep the MHCV market buoyant in FY2017.
PRICE PERFORMANCE
(%)
1m
3m
6m
Absolute
Relative to Sensex
12m
-2.2
4.8
30.2
99.4
-3.5
10.5
33.2
106.3

December 2015
Maintain Buy with a revised PT of Rs105: We have maintained our earnings estimates for
FY2016 and FY2017. We have also introduced earnings estimate for FY2018 with this
note. ALL is well poised to reap the benefits of the anticipated sustained uptrend in the
domestic CV industry over the next two to three years. We have shifted earnings multiple to
an average of FY2017 and FY2018. We remain positive on the stock and reiterate our Buy
recommendation with a revised price target of Rs105 (vs earlier Rs98).
12
EQUITY
STOCK UPDATE
FUNDAMENTALS
BRITANNIA INDUSTRIES
BUY
CMP: RS3,045
NOVEMBER 9, 2015
Strong performance continued; Buy maintained
COMPANY DETAILS
Price target:
Rs3,650
Market cap:
Rs36,536 cr
KEY POINTS
52-week high/low:
Rs3,435/1,507
2.1 lakh
BSE code:
500825
Britannias consolidated total revenue grew by 12% to Rs2,208.7 crore driven by a doubledigit volume growth. Adjusting for the excise duty issue, the total revenue growth stood at
13% on a Y-o-Y basis, which, we believe, is better in a difficult environment.
NSE code:
BRITANNIA
Sharekhan code:
BRITANNIA
5.91 cr
The gross profit margin improved by 297BPS YoY to 42.6% driven by a benign input cost.
On the other hand, the operating profit margin improved by 357BPS to 14.7% on the back
of better operating efficiencies. Hence, the operating profit grew by 47.6% YoY to Rs325.0
crore and the adjusted PAT grew by 53.7% YoY to Rs218.6 crore in Q2FY2016.
Britannia has made reasonable in-roads into some of the low-presence states in the northern
India and has strengthened its position in such regions. Also, the company has offered more
value to consumers along with re-stage of its key brands, Good Day and Milk Bikis,
which should help it maintain the strong growth momentum. The company started the
commercialisation of new factory at Tamil Nadu during the quarter. The initiatives in regards
to enhancing supply chain efficiencies, reducing wastage and accelerating cost efficiency
programmes will continue to aid in achieving good profitability in near future.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-3.8
0.3
40.0
102.7
Relative to Sensex
-1.5
7.1
40.8
112.4

We have broadly maintained our earnings estimates for FY2016, FY2017 and FY2018.
Britannia is well poised to achieve a double-digit revenue and earnings growth of 15% and
33% respectively over FY2015-18. In view of better earnings visibility over the long run, we
have maintained our Buy recommendation on the stock with an unchanged price target of
Rs3,650.
CENTURY PLYBOARDS (INDIA)
BUY
CMP: RS175
NOVEMBER 6, 2015
Decent result in challenging times;
PT revised to Rs240
COMPANY DETAILS
Price target:
Rs240
Market cap:
Rs3,892 cr
52 week high/low:
Rs262/135
KEY POINTS
6.7 lakh
BSE code:
532548
NSE code:
CENTURYPLY
Sharekhan code:
CENTURYPLY
5.9 cr
Q2FY2016 result synopsis: Century Plyboards (Century)s top line grew at 8.6% on a Y-oY basis, led by a 12.3% growth in the laminate business and a 6.8% Y-o-Y growth in the
plyboard and allied business. Across the board, the home improvement business was muted.
Aided by soft raw material prices and lower logistic cost, the gross profit margin improved
by 377BPS YoY, which resulted in a 102-BPS margin expansion at the operating level. As a
result, the operating profit grew by 15.7%. Due to a decent operating performance coupled
with lower depreciation and tax rate, the earnings grew by 29.4% on a Y-o-Y basis.
Management comments: The management continued to acknowledge the soft demand

environment prevalent in the home improvement segment that continues to post challenges
for volume growth in the plyboard business.
PRICE PERFORMANCE
(%)
1m
3m
6m
Absolute
8.6
-17.4
-14.1
19.0
10.4
-11.6
-11.4
24.5
Relative to Sensex
12m

Incorporated Q2, estimates reduced; maintain Buy with a revised price target of Rs240:
Incorporating the H1FY2016 results and the reduced guidance by the management on the
top line growth, we have marginally tweaked our estimates. Our revised EPS estimates for
FY2016 and FY2017 are Rs8.1 and Rs10.1 respectively. Despite revising earnings
estimatesdownwards, we believe that Century is well positioned to ride the economic revivaldriven recovery in demand and increase its market dominance in the plywood and laminate
segments. The implementation of GST would provide a fillip to the revenue and earnings
performance. In view of these positives, we maintain our Buy rating on the stock with a
revised price target of Rs240 (valued at 24x its FY2017E EPS of Rs10.1).
13
December 2015
STOCK UPDATE
EQUITY
FUNDAMENTALS
CESC
BUY
CMP: RS558
NOVEMBER 13, 2015
Q2 earnings much ahead of estimates; retain Buy
COMPANY DETAILS
Price target:
Rs730
Market cap:
Rs7,420 cr
52 week high/low:
Rs765/452
3.8 lakh
BSE code:
500084
NSE code:
CESC
Sharekhan code:
CESC
6.7 cr
KEY POINTS
Earnings ahead of estimate: For Q2FY2016, CESC reported substantially better earnings
than estimated. The revenue was in line with our estimate but the operating profit as well as
net earnings were better than our estimates. The operating profit registered a 5% growth
but on account of a higher interest cost, the PAT was flat (up 2% YoY) at Rs195 crore.
A mixed bag--result of power assets under subsidiaries and slow recovery of Spencers: The
600-MW power plant in Haldia is fully operational and supplying to Kolkata distribution.
The Chandrapur-based 600MW power plant is not operational (lack of fuel and power
purchase arrangement [PPA]), but the management plans to start the plant to supply 110MW
to Tamil Nadu SEB, which would be helpful to cover some part of the losses currently it is
incurring. FSL reported a strong quarter while on the retail business front, same-store sales
growth momentum remained positive in Q2FY2016 though the recovery is slower than
expected.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-9.0
-10.4
-1.6
-21.9
Relative to Sensex
-4.9
-3.7
3.5
-17.0

View and valuationreiterate Buy with unchanged PT of Rs730: We believe the negatives
related to the loss in the Chandrapur plant and potential under recovery as a result of
aggressive bidding for coal mines have been already priced in the stock. Nevertheless, the
company continues to put efforts to cover the under recovery from exporting some power in
exchange and get PPA linkage for the new plant. The drag related to retail subsidiaries is
receding though slower than expected. Overall, the financials of FSL should improve. We
have retained our positive stance on CESC with a Buy rating and an unchanged price target
of Rs730.
EROS INTERNATIONAL MEDIA
BOOK PROFIT
CMP: RS238
NOVEMBER 13, 2015
Multiple red flags emerge; exit
COMPANY DETAILS
Market cap:
Rs2,224 cr
52 week high/low:
Rs644/238
KEY POINTS
3.5 lakh
BSE code:
533261
NSE code:
EROSMEDIA
Sharekhan code:
EROSMEDIA
Probable class action suits against Eros Plc, concerning possible violations of Federal securities
laws: Wolf Haldenstein Adler Freeman and Herz LLP announced that it has commenced an
investigation on Eros International Plc (Eros Plc), pertaining to possible violation of Federal
securities laws by the company and its officers/directors and has asked exiting investors in
Eros Plc to come forward to file a class action suit against the company.
2.46 cr
Multiple red flags raised by international media and analysts, dented investors confidence
in Eros: On October 30 2015, a report was published on Eros Plc asserting, among other
things, that: (1) Eros Plcs reported earnings are significantly overstating the economic reality
of its business model; (2) the financials of Eros Plcs subsidiary revealed a lack of free cash
flow and raised many questions about the companys accounting; and (3) Eros Plc has
enriched its controlling family at the expense of shareholders through a series of relatedparty transactions.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-44.9
-51.9
-35.1
-7.0
Relative to Sensex
-42.4
-48.4
-31.8
-1.1

December 2015
Stock to remain under pressure, till the overhang clears, advise to exit: Owing to the recent
negative news flow in the international media which have raised red flags on the companys
parent (Eros Plc)s accounting policy and the overall corporate governance, Eros International
Media Ltd (EIML) has corrected sharply. Given the concern of free cash flow generation
and corporate disclosure, we had also earlier downgraded our rating on EIML from Buy to
Hold from Q1FY2015. Given the aggravation of corporate governance issue in international
media and probable class action suits against its parent, it is very unlikely for the stock of
EMIL to recover lost ground soon or till the time the issues are clear. We advise to exit from
the stock at the current level.
14
STOCK UPDATE
EQUITY
FUNDAMENTALS
GABRIEL INDIA
BUY
CMP: RS86
NOVEMBER 4, 2015
Maintain Buy with a revised price target of Rs105
COMPANY DETAILS
Price target:
Rs105
Market cap:
Rs1,237 cr
KEY POINTS
52 week high/low:
Rs107/72
8.5 lakh
BSE code:
505714
NSE code:
GABRIEL
Sharekhan code:
GABRIEL
65.16 cr
Revenue decline continues in Q2FY2016: Gabriel India (Gabriel) had another disappointing
quarter as its revenue declined by 2.4% YoY to Rs375 crore, in line with our expectation.
However, the company benefitted from the softer commodity prices and favourable product
mix which led to a 73-BPS Y-o-Y operating profit margin (OPM) expansion to 8.8% vis-vis our estimate of 8.5%. Gabriel posted a net profit of Rs19.4 crore (higher by 10.6%
YoY) as against our expectation of Rs18.1 crore.
Revenue growth revival expected in FY2017: The two-wheeler industry (60% of the overall
sales) is going through difficult times. Although the scooter segment has been growing, the
motorcycle demand remains muted due to the slowdown in rural India and thus is affecting
revenues for Gabriel. The companys revenues in the PV segment are expected to pick up
with the start of production on two models with Maruti Suzuki India Ltd (MSIL) and a
platform with Mahindra & Mahindra (M&M). We expect revenue growth in FY2016 to be
muted in low single digits and the company to return to double-digit growth in FY2017 as
the motorcycle segment recovers and production for new models with key customers
commences.
PRICE PERFORMANCE
(%)
1m
3m
6m
Absolute
3.9
-2.5
7.7
12m
5.4
Relative to Sensex
2.3
3.1
8.1
8.9
Maintain Buy with a revised price target of Rs105: We have cut our earnings estimates for
FY2016 and FY2017 by about 10% each to factor in a lower revenue growth. While the
demand scenario is expected to remain muted in FY2016, we expect a robust growth in
FY2017 on the back of a ramp-up in supplies to Honda Motorcycle and Scooters new plant
in Gujarat and to the new models of both MSIL and M&M. We have shifted the target
multiple to an average of FY2017 and FY2018 and reiterated our Buy rating on the stock
with a revised price target of Rs105 (earlier Rs100).
GLAXOSMITHKLINE CONSUMER HEALTHCARE
BUY
CMP: RS5,816
NOVEMBER 16, 2015
Volume growth to pick up gradually; Buy
maintained with revised PT of Rs6,750
COMPANY DETAILS
Price target:
Rs6,750
Market cap:
Rs24,384 cr
52 week high/low:
Rs6,564/5,425
10,419
BSE code:
500676
NSE code:
GSKCONS
Sharekhan code:
GSKCONS
1.2 cr
KEY POINTS
In Q2FY2016, GSK Consumers revenue stood flat at Rs1,074.7 crore with a volume decline
of 1.5%. Adjusting for the impact of the excise benefit of 520BPS, the like-to-like revenue
growth for the quarter stood at 5%. As anticipated, the lower raw material prices led to a
371-BPS improvement in the gross profit margin to 65.3% and the operating profit margin
improved by 278BPS YoY to 22.1%. This coupled with a 31% increase in business auxiliary
income led to a 25% growth in the adjusted PAT.
The company has maintained its distribution enhancement and new product/variants as its
key growth drivers going ahead. It has further enhanced its distribution reach by 77,000
outlets to reach 3.2 million outlets in H1FY2016 (target is to reach close to 4.0 million
outlets by the end of FY2016). Also, the company has maintained its thrust on adequate
brand building and promotional activities. It is banking on the new variants launched under
the Horlicks brand to improve the sales volume in long run.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-1.1
-5.1
-4.9
5.7
Relative to Sensex
3.5
1.8
0.0
13.6

We have revised downwards our earnings estimates for FY2016 and FY2017 by 5% and
3% respectively to factor in a slow pick-up in the demand for HFD sales. GSK Consumer
continued to gain market share in the domestic HFD segment, which indicates a slowdown
in the category. We expect the volume growth in the HFD segment to gradually improve
with substantial improvement in the urban demand environment. The company continues
to have strong cash flows and expect better dividend payout to continue in the coming
quarters. Hence, we have maintained our Buy recommendation on the stock with a revised
price target of Rs6,750.
15
December 2015
EQUITY
STOCK UPDATE
FUNDAMENTALS
INFO EDGE (INDIA)
BUY
Price target:
Rs1,000
Market cap:
Rs8,540 cr
CMP: RS708
NOVEMBER 6, 2015
In-line operating performance; maintain Buy with
revised PT of Rs1,000
52 week high/low:
Rs1,014/700
KEY POINTS
1.0 lakh
BSE code:
532777
NSE code:
NAUKRI
Sharekhan code:
NAUKRI
6.8 cr
In-line operating performance: For Q2FY2016, Info Edge has delivered an in-line operating
performance, with a revenue growth of 18% YoY to Rs174.1 crore. The performance was
led by a 19.6% Y-o-Y growth in recruitment solutions (Naukri) to Rs128.2 crore while the
revenue from 99acres was up by 13.5% YoY to Rs27.8 crore. The net income for the
quarter was up by 2% YoY and 18% QoQ to Rs33.9 crore.
COMPANY DETAILS
Key management commentary: (1) Naukris growth momentum to continue led by IT market
in Bengaluru, up by 20-25% YoY, while revival in non-IT segment will drive the incremental
growth with a 15-20% Y-o-Y growth. Expect growth to sustain at 18-20% and margins to
improve further; (2) 99acres (real estate market) is witnessing a slowdown in the Delhi NCR
region (the largest market for the company) and other markets like Mumbai; overall transactions
volume has fallen across the markets with inventory piled up to an all-time high
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-7.9
-15.1
-5.0
-16.0
Relative to Sensex
-6.3
-9.1
-2.0
-12.2
Maintain Buy with a revised price target of Rs1,000: Given the slowness in demand in the
real estate market, we have lowered our estimates and target multiple for 99acres and also
lowered our overall SOTP-based valuation for Info Edge to Rs1,000 (from Rs1,103 earlier).
Nevertheless, we continue to see Info Edge as a strong play on Indias internet and mobile
penetration theme. Info Edge, with a strong online presence through various ventures,
recruitment (Naukri), real estate (99acres), restaurant listing (Zomato) and coupons industry
(mydala.com), is a preferred play on both e-commerce/online shift and macro recovery. We
have maintained our Buy rating on the stock with a revised price target of Rs1,000.
JB CHEMICALS & PHARMACEUTICALS
BOOK PROFIT
CMP: RS282
NOVEMBER 26, 2015
Outlook remains uncertain due to currency
headwinds; Book profit
COMPANY DETAILS
Market cap:
Rs2,397 cr
52 week high/low:
Rs318/180
NSE volume(no. of shares):
1.9 lakh
BSE code:
506943
NSE code:
JBCHEPHARM
Sharekhan code:
JBCHEPHARM
3.8 cr
KEY POINTS
Volatility in currency affects exports in key emerging markets: JBCPL reported a moderate
3% growth in exports of formulation to Rs133 crore during Q2FY2016. The exports to the
Rest of the World (RoW) markets (10% decline during the quarter) were affected due to
lower demand and depreciation of market currencies against dollar.
Outlook remains bleak; Book profit: The volatility in currencies in key emerging markets is
likely to have an effect on H2FY2016 performance too. Also, for FY2017, demand will
continue to be weak as dollar is likely to strengthen further. Hence, the operating profit
margin and profitability are likely to remain under pressure over the next few quarters.
Hence, in view of bleak future, we advise our investors to Book profit from the stock.
PRICE PERFORMANCE
(%)
1m
3m
6m
Absolute
-7.9
13.2
20.6
42.9
Relative to Sensex
-1.9
12.7
29.3
55.7
12m

December 2015
Sluggish performance continued in Q2: In Q2FY2016, JB Chemicals and Pharmaceuticals

Ltd (JBCPL) reported a subdued performance with a revenue growth of just 2%, while
operating profit margin declined by 350BPS to 17%. This quarter was the fourth consecutive
quarter of dismal operating performance by the company.
16
EQUITY
STOCK UPDATE
FUNDAMENTALS
KDDL
BUY
CMP: RS270
NOVEMBER 6, 2015
Maintain Buy with revised PT of Rs360
COMPANY DETAILS
Price target:
Rs360
Market cap:
Rs272 cr
52-week high/low:
Rs425/153
NSE volume (No of shares):
0.15 lakh
BSE code:
532054
Sharekhan code:
KAMLADLS
Free float (No of shares):
0.5 cr
KEY POINTS
Consolidated performance snapshot: For Q2FY2016, KDDLs consolidated top line grew
by 12.6% on a Y-o-Y basis, aided by a robust 25.4% Y-o-Y growth in Ethos, while the
manufacturing business posted a 7% decline in the revenue.
Ethos performance good: For Ethos, festive and marriage season drives demand for its
product, thus in the light of Diwali falling in Q3 this year as against Q2 in the last year, a
revenue growth of 25.4% YoY is robust. Further, the other key indicators like increasing
sales from the online segment (for Q2FY2016, 28% sales came from online) and growth in
traffic (for H1FY2016 36% Y-o-Y growth in the traffic was witnessed) are in line with the
strategy of attaining growth through omni-channel presence.
PRICE PERFORMANCE
(%)
1m
3m
6m
Absolute
-7.4
-17.2
-22.1
12m
70.8
Relative to Sensex
-5.8
-11.4
-19.7
78.8

Maintain Buy; revised price target to Rs360: Incorporating weak Q2 manufacturing results
into our model, we have marginally revised our earnings estimates downwards for the
manufacturing business. Thus, our consolidated EPS estimates for FY2016 and FY2017 are
Rs11.5 and Rs14.1 respectively. Further, the growth momentum and the margin expansion
trend in the Ethos business are panning in line with our expectation. Thus, we continue to
like Ethos' unique high-end watch retailing business, which is expected to grow manifold by
cashing in on the growth in the luxury watch segment and the increasing trend towards
online e-tailing. Hence, we have maintained our Buy rating on the stock with a revised price
target of Rs360 (valued at 6x its FY2017E earnings for the stand-alone business + 1.2x its
FY2017E sales of Ethos).
MAHINDRA & MAHINDRA
BUY
CMP: RS1,258
NOVEMBER 6, 2015
Maintain Buy with an unchanged PT of Rs1,450
COMPANY DETAILS
Price target:
Rs1,450
Market cap:
Rs77,239 cr
52 week high/low:
Rs1,441/1,095
11.1 lakh
BSE code:
500520
NSE code:
M&M
Sharekhan code:
M&M
45.7 cr
KEY POINTS
OPM at 13.2% below estimate; PAT beats estimates on higher revenues and lower tax rate:
Mahindra & Mahindra (M&M)s poor run in terms of volumes continued in Q2FY2016
with auto and tractor divisions reporting a 2.2% and 26% fall respectively. The net sales for
the quarter at Rs8,794 crore (down 2.8% YoY) beat estimates due to a sharp jump in
revenues from the genset business. The OPM contracted by 110BPS sequentially to 13.2%
(vs expectation of 13.5%) due to the lower operating leverage. A higher revenue and a
lower tax rate enabled M&M to post a net profit of Rs978 crore, slightly higher than our
estimate of Rs951 crore.
Weak monsoon casts a shadow on tractor segment recovery; new launches to boost auto
volumes: The sub-par monsoon rainfall during the season has hampered the recovery in the
tractor segment. The management has cut its guidance for FY2016 tractor industry from a
growth of 4-5% earlier to a decline of 5%. The outlook for the auto division is positive. The
company has received a positive response for the recently launched TUV3OO and the
management expects the model to stabilise at monthly volumes of 5,000 units. The company
will be following with the launch of another model (code name S101) in January which
would further boost volumes.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-0.9
-9.2
7.8
1.2
Relative to Sensex
0.8
-2.8
11.2
5.9
Maintain Buy with an unchanged PT of Rs1,450: Given the current weakness in the tractor
segment and a delay in the recovery, we have cut our earnings estimate for FY2016 by 3%.
We remain positive on the stock, given its leadership position in the domestic tractor and
UV segments as well as the value derived from its subsidiaries across business segments. We
maintain our Buy recommendation on the stock with an SOTP-based price target, unchanged
at Rs1,450.
17
December 2015
EQUITY
SUN PHARMACEUTICAL INDUSTRIES
BUY
CMP: RS757
NOVEMBER 9, 2015
Maintain Buy with a price target of Rs950
COMPANY DETAILS
Price target:
Rs950
Market cap:
Rs182,134 cr
52-week high/low:
Rs1,200/748
36.8 lakh
BSE code:
524715
NSE code:
SUNPHARMA
Sharekhan code:
SUNPHARMA
109 cr
KEY POINTS
High tax rate dents earnings: Revenue for the quarter declined by 15% to Rs6, 838 crore on
account of decline in sales in the US and RoW markets, and supply constraints at its Halol
plant. Also, revenue in Q2FY2015 included sales from Valsartan, in its 180-day exclusivity.
The operating profit margin declined by 986BPS to 28.3% in Q2FY2016.
Synergy with Ranbaxy and Halol plant, the key developments to watch ahead: The
management is confident about the synergy with Ranbaxy through improving productivity
of the overall Ranbaxy business and getting synergy benefits on certain products from
FY2018. As part of strategy, the company will focus on high-margin products which are
strategically fit and will continue to remain focused on the OTC business. The launch of
Glivec in Q4FY2016 will remain a key trigger for the company.
Near-term outlook remains cautious: Earlier, the company had issued caution statement
regarding sales and profits for FY2016 due to the integration of Ranbaxy and supply
constraints from Halol. Remediation efforts at Halol are on track but will take some time.
After the settlement of Glivec with Novartis, Sun Pharma has delisted the drug from Halol
and filed from an alternate site. We believe Sun Pharma will take two to three quarters more
to complete its restructuring and remediation efforts at Halol.
PRICE PERFORMANCE
(%)
Absolute
STOCK UPDATE
FUNDAMENTALS
1m
3m
6m
12m
-11.4
-4.6
-14.0
-7.5
-9.3
2.5
-13.5
-3.1
Relative to Sensex

Maintain Buy with price target of Rs950: Remediation efforts at Halol are on track but will
take some time. Complete benefits of the remediation processes will be visible in FY2018.
The filing of Glivec from an alternate site is a silver lining to the cloud. We have maintained
our Buy rating on the stock with a price target of Rs950.
TRIVENI TURBINES
BUY
CMP: RS110
NOVEMBER 18, 2015
Strong Q2 but joint venture order intake weak;
PT revised to Rs135
COMPANY DETAILS
Price target:
Rs135
Market cap:
Rs3,629 cr
52 week high/low:
Rs152/90
KEY POINTS
62,205
BSE code:
533655
NSE code:
TRITURBINE
Sharekhan code:
TRITURBINE
9.9 cr
Pick-up in order execution drives Q2 growth: For Q2FY2016, Triveni Turbines Ltd (TTL)
reported a 14% Y-o-Y growth in revenue led by a strong 21% growth in product sales. The
aftermarket segment has reported a marginal fall in revenue mainly due to unfavourable
base effect. Lower raw material cost led to a 110-BPS improvement in operating profit
margin to 23.5%, the highest in the past ten quarters. Overall, the net profit rose by 16% to
Rs27.7 crore.
Order booking robust in stand-alone business, sluggish intake in GE joint venture: In

Q2FY2016, it reported an order intake of Rs200 crore (up 40% YoY) taking the standalone order book to Rs680 crore (up 13% YoY and 10% QoQ). The consolidated order
book stood almost flattish at Rs790 crore as its joint venture (JV) with GE did not have any
order finalisation during H1FY2016. Since the major overseas orders would be executed by
FY2016 itself, the JV would need to pick up its order booking pace to achieve the required
growth rate in FY2017.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-3.3
-6.6
-5.0
-3.8
Relative to Sensex
1.7
0.4
-0.7
3.3
Estimates downgraded, price target revised to Rs135: We have downgraded our earnings
estimates for FY2016 and FY2017 by 7% and 11% respectively mainly in view of slow
order booking in its JV with GE. We have also introduced our FY2018 estimates in this
note. We expect net profit to double (CAGR of 26%) in three years, FY2015-18. We like
the stock for its strong competitive positioning, international marketing efforts, margin
profile and healthy balance sheet (it is a debt-free company with superior return ratios). Any
major order win in the GE JV in the near term would be a positive trigger for the stock. We
have maintained our Buy rating on the stock with a revised price target of Rs135.
December 2015
18
EQUITY
SHAREKHAN SPECIAL
FUNDAMENTALS
SHAREKHAN SPECIAL
NOVEMBER 27, 2015

Goods and Services Tax Bill
Key points
mean tax saving of 3-4% for many manufacturing segments; a

GST rate beyond 22% could be detrimental to business
confidence and growth in near term). However, the proposed
GST bill has exclusions and an additional tax of 1% for interstate movement for the initial two years which dilutes the essence
of GST (to an extent) and limits positive impact on the economy.
GSTsimplified indirect tax regime: The Goods and Services
Tax (GST) Bill aims to simplify the current indirect tax regime
by bringing all central and state levies (like excise duty, sales
tax, octroi, VAT and other countervailing duties) under one
single head having uniform tax rate across goods and services
(with some exclusions like electricity, alcohol and petroleum
products).
Preferred Picks: (1) Maruti Suzuki India: potential reduction in
effective tax rate for mid-sized passenger vehicles; (2) Britannia

Industries: cost optimisation at each level of product value chain
and competitive advantage could improve the growth prospects
in long run; (3) Gateway Distriparks: with services across the
distribution value chain, it will gain from incremental demand
arising from the higher inter-state transport of products; (4)
Century Plyboards: organised players to gain market share with
unorganised players losing tax advantage; and (5) Pantaloons
Fashion & Retail: set-off for service tax paid on lease rentals
and inventory cost optimisation.
Critical reform; to boost economic revival: The benefits are
immense in terms of reducing economic distortions, creating a

nationwide single tax market, widening of tax base and
eliminating cascading of taxes (tax on tax). For manufacturing
companies, it means level playing field for organised and
unorganised sectors, and cost optimisation in terms of movement
and warehousing of goods due to a uniform tax rate.
Consequently, it would have a positive fall-out on inflation,
curtailing tax avoidance and creating buoyancy in the economy.
According to official estimates, the implementation of GST could
bring in incremental positive effect of 1.0-1.5% in the GDP
depending upon the GST rate (likely range of 18-20% would
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or
having a postition in the companies mentioned in the article.
Source: Company data, Sharekhan Research
SHAREKHAN SPECIAL
NOVEMBER 24, 2015

Q2FY2016 earnings review
Earnings soft as expected; ex global cyclical growth appears

reasonable: In Q2FY2016, the aggregate earnings growth for the
Sensex companies (BSE-30) remained soft (down 2% year on year
[YoY]) due to a slow pace of economic recovery and domestic
demand coupled with pressure on global cyclicals (global commodity
companies, ie metals and energy). However, excluding global
cyclicals (ex metals, energy and Tata Motors), the earnings showed
a decent growth of 7% compared with Q2FY2015.
of a decline in the interest rates and the implementation of the

Seventh Pay Commissions recommendation remain the key enablers
of a demand recovery over the medium term. The EBITDA margin
improved by 48 basis points (BPS; YoY) which along with a lower
interest cost supported the earnings.
Bracing for sub-10% earnings growth in FY2016; hopes pinned on
H2 performance: The Q2FY2016 earnings season saw the consensus
earnings estimate for the Sensex being downgraded by about 2%,
implying a growth of 7-8% in FY2016 and of 18-20% in FY2017.
Sectors like industrials and global cyclicals saw a higher downgrade
compared with IT services and pharma companies while energy
companies saw a marginal upward revision in the earnings estimates.
Going ahead, hopes are pinned on the H2FY2016 performance led
by a gradual improvement in the consumer demand (led by low
inflation, a dip in interest rates) along with a low base effect (H2 of
FY2015 was exceptionally weak).
Earnings breadth relatively better: The earnings breadth was

relatively better as 20 out of the 30 Sensex companies showed a
growth in earnings YoY with 12 showing a double-digit growth.
There was a mixed set of surprises as heavyweights like Zee
Entertainment Enterprises Ltd (ZEEL), Dr Reddys Laboratories
(DRL), State Bank of India (SBI), Tata Steel, NTPC and Reliance
Industries Ltd (RIL) delivered a positive surprise whereas Tata
Motors (a one-off loss of Rs2,650 crore), Bharat Heavy Electricals
Ltd (BHEL), Larsen and Toubro (L&T), Lupin and Sun
Pharmaceutical Industries (Sun Pharma) surprised negatively. From
a sectoral perspective, the financial and information technology
(IT) services companies registered a double-digit growth while
capital goods and pharmaceutical (pharma) companies disappointed
the most with their earnings performance.
Outlookpolicy push and reasonable valuations: Of late, the

government has initiated several executive-led reforms (revival of
distribution companies, increase in foreign direct investment [FDI]
in multiple sectors) and is trying to push the Goods and Services
Tax (GST) bill in the upcoming session of the Parliament, reflecting
its intention to shift focus to policy activism. The Sensex is trading
at reasonable valuation (14.5x FY2017E earnings) even after
factoring .
Revenue momentum remains slack, margin expansion a silver line:

The revenue growth has remained in the negative territory for the
past few quarters (down 6% in Q2FY2016 for the Sensex
companies) reflecting weak underlying demand. Barring the IT and
financial companies, the top line growth of most of the sectors
remained in low single digits or negative. Going ahead, the lag effect
Source: Company data, Sharekhan Research
19
December 2015
VIEWPOINT
EQUITY
FUNDAMENTALS
AURIONPRO SOLUTIONS
VIEWPOINT
CMP: RS206
VIEW: BOOK OUT
NOVEMBER 6, 2015
Earnings falling short of expectations; call closed with a loss of 24%
Key points
Disappointing earnings performance: Aurionpro Solutions Ltd

(ASL) has reported a disappointing set of numbers for
Q2FY2016, with the operating profit margin falling by 300BPS
QoQ and 600BPS YoY to 11.8%. Though the revenues were
up by 7.6% QoQ to Rs176.8 crore, the same were down 4%
YoY. The net income for the quarter fell by 25% QoQ and by
35% YoY to Rs12.4 crore. For H1FY2016 the revenues were
down by 6.1% YoY while the OPM declined by 450BPS and
the net income fell by 14.3% YoY.
of the sales team, rationalisation of the G&A, consolidation of

operations and a gradual shift of clients engagement to offshore.
However, looking at the recent earnings performance, we believe
the companys strategy to revive earnings growth is falling short
of expectations and will take longer than expected.
Earnings performance falling short of our expectations: In our

initiation Viewpoint note dated October 16, 2014, we had
expected ASLs earnings trajectory to improve on the back of
the companys strategic and operational restructuring activities
including a gradual exit from the low-margin business, expansion
Call closed, book loss of 24% from our initiation level: After
the initiation of the call at Rs270, the stock has touched a high
of Rs316 on November 10, 2014. However, owing to a lacklustre
financial performance ASL could not get re-rated as was expected
at the time of initiation of the call. We believe that an
improvement in the financial performance could be further
delayed. Therefore, we close our Viewpoint recommendation
on ASL with a loss of 24% from our initiation price.
LLOYD ELECTRIC & ENGINEERING
VIEWPOINT
CMP: RS273
VIEW: BOOK PROFIT
NOVEMBER 4, 2015
Book profit for a gain of 42% in the last one month
Key points
Posts absolute gains of 42%; limited scope for further re-rating

in the near term: We had recommended re-entering Lloyd Electric
& Engineering Ltd (LEEL) in our Viewpoint report (dated
October 1, 2015) as the risk-reward ratio had turned favourable
post-correction. Since the release of our report, the stock has
appreciated by 43% in a span of just over one month and
narrowed the valuation gap with some of its peers like Voltas
and Blue Star. Hence, we advise investors to Book profit.
Competitive intensity could lead to margin pressure: In

Q1FY2016, the company posted a strong 68% growth in
consumer durable (CD) revenue, mainly led by volume growth.
While we remain positive on the companys growth prospects,
competitive pricing pressure and inventory build-up in the

industry (especially in the AC segment) amid slow demand
environment could lead to some margin pressure in the coming
few quarters. Its elongated working capital could also result in
liquidity crunch in the near term. Hence, on a tactical basis, we
recommend investors to Book profit, while we also advise them
to re-enter the company in case of any declines.
Risk to our call: A better-than-expected uptick in the urban
discretionary demand; and if the company is able to show
improvement in working capital cycle it could see further rerating from the current level.
December 2015
20
VIEWPOINT
EQUITY
FUNDAMENTALS
TATA MOTORS
VIEWPOINT
CMP: RS396
VIEW: POSITIVE
NOVEMBER 6, 2015
Fall in JLR profitability affects Q2FY2016 results
Key points
significantly higher than other geographies. The retail sales in

China after having declined for the last ten months have turned
positive in October. The management expects the Chinese market
to slowly get back on track which will also have a positive effect
on margins. However, the new launch and marketing expenses
are expected to remain elevated for the next couple of quarters
as the company has a heavy launch pipeline. Meanwhile, the
domestic operations have shown a decent recovery with OPM
at 5.8%. We expect the trend to continue as the commercial
vehicle (CV) segment gathers momentum.
Q2FY2016 consolidated results below estimate due to fall in

JLR profitability: Tata Motors (TAMO)s Q2FY2016
consolidated results were below expectation given the higherthan-expected fall in Jaguar Land Rover (JLR) profitability. JLR
margins for the quarter were under stress given the unfavourable
geography mix (lower proportion of China sales) and higher
expenses related to new launches (Jaguar XE and Discovery
Sport) and marketing. TAMOs consolidated margins for
Q2FY2016 stood at 11.2% as against our expectation of 14.4%.
Additionally, the company took a hit of Rs2,493 crore related
to destruction of vehicles by fire at Tainjin port in China.
Adjusted for an exceptional loss, the adjusted net profit stood
at Rs1,360 crore as against our expectation of Rs2,100 crore.
Management guides for a positive outlook in H2FY2016: JLRs

H1FY2016 performance has been marred by the weakness in
the Chinese market even as the other developed geographies
like the UK, USA and Europe continue to perform well. However,
the lower contribution from China has an effect on the overall
profitability of the company, given the realisations in China are
10% cut in earnings estimates: We have cut our earnings for

FY2016E and FY2017E by 10% each on account of the lower
margin expectation for JLR operations. The stock has
appreciated by 15% from the date of our Viewpoint dated
September 9, 2015 with a positive view. Despite the cut in
estimates we remain positive on the stock and expect a 15-18%
upside from the current level.
WELSPUN SYNTEX
VIEWPOINT
CMP: RS112
VIEW: BOOK PROFIT
NOVEMBER 2, 2015
Increasing effective tax to limit earnings growth; Book profit with 27% gain
Key points
We had recommended buying Welspun Syntex Ltd (WSL) in

our Viewpoint report (dated July 16, 2015) based on three key
rationales: (1) Focus on specialty yarns like bulk continuous
filament (BCF, used in carpets), drylon (used in bath rugs) and
niche markets which has boosted its profitability in the recent
quarters; (2) comfortable gearing levels with robust return ratios;
and (3) available at attractive valuations. Since the release of
our Viewpoint note, the stock has appreciated by 27% in a time
period of close to three and a half months.
liability in H1FY2015) limited the earnings growth to 8% YoY.

We feel that the expected tax liability at full tax rate would
limit its earnings growth in FY2017 also and consequently, the
earnings growth could fall short of expectations.
With the current valuation of 9x forward earnings, the stock

seems fairly valued, given the fact that it is in a commoditised
business. Therefore, we see a limited near-term upside and
recommend our investors to Book profit at this level.
In H1FY2016, while the margin expansion of 190BPS to 12.2%

was better than expected, a higher tax outgo (19.3% versus nil
21
December 2015
EQUITY
TECHNICALS
TREND & VIEW
In the final stages of correction

Daily view on Nifty
The Nifty seems to have completed its pull-back in wave x of

wave z down and now wave y of wave z down has begun which
will inch towards our medium-term target of 7422.
The index has formed a bearish head-and-shoulders pattern

on the daily chart and the neckline support of the same is pegged
at 7691. So when this support is broken the index will slide
sharply towards our medium-term target.
The daily momentum indicator has given a positive cross-over.
Crucial supports for the index will be around 7691 and 7540
while crucial resistance will be near 7980 and 8340.
Weekly view on Nifty
The Nifty has reversed after retracing 38.2% of its previous

fall from 8336 to 7714 levels. Now, the next leg down in its
wave z has begun. The pull-back was a corrective one; hence,
the probability of a downside from hereon is quite high.
The index has reversed from the upper end of the downtrend
line resistance and is now heading towards the lower end of the
downtrend line support. The minimum target is 7422 level;
however, the wave equality target comes to 7382 level.
The momentum indicator is in sell mode. The reversal is pegged

above 8440 and as long as that is held the short-term trend
shall remain down.
A crucial support would be around 7540 and resistance would

be around 8340.
Monthly view on Nifty
The Niftys monthly chart gives the clearest view that the wave
Z down is pending which will take the index below its previous
swing low of 7540 level.
The Nifty needs to take off the falling channel on the upside
with a buy cross-over in its momentum indicator in order to
confirm the reversal from down to up.
The index has a reversal pegged at 8440, ie the channel

resistance, and until that level is taken off it will be difficult to
say if the market has bottomed. The downside risk is still there
as the recent bounce is also not impulsive on the way up. So,
below 7691 the trend will accelerate on the downside which
will take the index towards the monthly lower Bollinger Band,
which currently stands at 7320.
A crucial support will be around 7540 and a crucial resistance

will be around 8340.
Medium term
Trend
Trend reversal
Support
Resistance
Target
Down
8440
7422
8440
7422
December 2015
22
MONTHLY VIEW
EQUITY
DERIVATIVES
Derivative View: Santa rally unlikely

Roll-overs in Nifty stood at 68.63%, which was a bit lower
compared with the previous months roll-over of 73.62%. The
market-wide roll-over stood at 83.63%, which is in line with the
previous months roll-over of 83.92%.
The November series witnessed significant selling pressure due to

which the Nifty closed with a loss of around 2.50% compared
with the previous series. The fall from 8200 to 7800 was mainly
backed by a short build-up by market participants and that too by
the stronger hands of the masses due to which the Nifty made a
low of the series at around 7700, which was our target in the
previous column, Shorts getting built up at every high.
Top 5 stock futures with the highest OI in current series

STOCK FUTURES (SHAREKHAN SCRIP CODE)
The roll-over in the December series was a bit on the lower side at
68% compared with its last series where the roll-over was around
73%. But with fresh accumulation of short positions since the start
of this series we feel the market is still in a downward trend. The
sell-off in the recent trading sessions was not only due to the short
build-up but also due to the weakening of the fundamentals as a
majority of the large-cap stocks disappointed in their earnings.
Market participants were also concerned about the looming interest
rate hike decision by Fed later in this month and the relentless selling
by the foreign institutional investors (FIIs) in the cash market
because of that. In the derivatives segment too the FIIs have been
selling in index futures and they are now net short in index futures.
However, similar to the last few series their major participation in
the derivatives market has been through the index options as they
have already bought more than Rs6,500 crore worth of index
options. In the past we observed that whenever they went long on
index options with large volumes the Nifty witnessed a significant
amount of volatility.
2458.41
HDFCBANK
2381.05
AXISBANK
2062.48
SUNPHARMA
1654.41
SBIN
1609.88
Top 5 stock options with the highest OI in current series

STOCK OPTIONS (SHAREKHAN SCRIP CODE)
ROLL-OVER: MARKET-WIDE VS NIFTY
OPEN INTEREST (RS CR)
RELIANCE
541.59
MARUTI
535.15
SBIN
517.49
DRREDDY
456.49
LT
449.55
View
On the options front, since the start of the December series a lot of
activity has been observed in deep out-of-the-money strike price.
The 7500 put option stands with the highest number of shares in
open interest followed by the 8000 strike price, which is an in-themoney put option. On the call side, a heavy pile-up of open interest
is observed at 8000-8200 strike price levels indicating a stiff
resistance around those levels. The Volatility Index has been
constantly moving lower and is currently at a three-month low at
16. The put-call ratio since the start of the December series has
been on the lower side. Currently, it is at around 0.79 levels. In
view of the above data, with accumulation of fresh short positions
despite a low roll-over, increase in activity in the out-of the money
put options and simultaneous heavy pile-up of open interest in call
options, we feel the Nifty would find it difficult to cross the 80508100 level. On the lower side, below the 7780-7800 level (which
was a strong support for the last series) the Nifty could see further
sell-off till the 7500-7600 level in the coming trading sessions.
Roll-over highlights
The benchmark index Nifty started the December series with around
1.95 crore shares vs 2.05 crore shares in the previous series. In
rupee terms, it started the new month with open interest of Rs15,436
crore in Nifty futures vs Rs16,966 crore in the previous series while
in stock futures it started the series with Rs58,530 crore of open
interest vs Rs57,106 crore in the previous series. In index options it
started the month with Rs77,170 crore of open interest vs Rs76,082
crore in the previous series and in stock options it saw open interest
of Rs4,712 crore vs Rs5,525 crore in the previous series.
OPEN INTEREST (RS CR)
RELIANCE
23
December 2015
COMMODITY
FUNDAMENTALS
MONTHLY VIEW
Commodities: Vulnerable as the Fed prepares to hike rates despite not-so-strong economy
Macro-economy
Key points
US adds 211k jobs in November, jobless rate steady; participation
rate 62.5% vs expectations of 62.4%, prior 62.4%

US hiring revised higher in October and September by a combined
35,000 jobs
US trade deficit widens as exports hit a three-year low
US ISM Non-manufacturing Index dropped more than expected in
November; actual 55.9, expected 58.00, prior 59.1
Yellen set to hike rates amid a revenue, profit and manufacturing recession
US Manufacturing PMI tumbles to two-year low
US new home sales lag the forecast as median price drops to the lowest
in 13 months
US durable goods new orders fell for the seventh straight month YoY
US Q3 GDP growth revised higher to 2.1% from 1.5% on inventory
adjustment
Chinas economy remains weak while the US economy is sending mixed
signals
China: Caixin's Services PMI shows a sudden drop near the 2015 lows
Chinas official Manufacturing PMI just collapsed to its lowest level
since august 2012
Chinas auto dealers issue the highest inventory alert since June in
November as sales decline
Chinas industrial profits decline for fifth straight month
China said to consider probe of short-selling in domestic metals
Chinas yuan to be included in the SDR basket from October 1, 2016
Markets disappointed with the ECB as Draghi extends QE, but no
size increase
Euro area economic confidence matched its highest level in more than
four years
Euro zone credit cycle resumes upward trend albeit with varying degrees
in members
BoJs Kuroda: BoJ needs to be creative in stimulus; adjustment needed
if disinflation affects inflation expectations
COMMODITY PRICES IN NOVEMBER 2015 (IN $)

Commodity
High
Low
Close
MoM chg %
Copper
5220.0
4443.0
4586.0
-10.3
Zinc
1717.0
1563.0
1563.0
-8.6
Lead
1712.0
1551.0
1647.0
-2.8
Nickel
10170.0
8145.0
8900.0
-11.5
Gold
1143.0
1052.0
1065.0
-6.7
Silver
15.6
13.9
14.1
-9.4
Crude oil
51.4
42.6
46.6
2.3
MONTHLY CHANGE IN DOE CRUDE STOCKS (OCT-NOV 2015)

Crude oil
Change in (kbls)
27th November (kbls)
Change in (%)
Dist.
Gasoline
6614
3658
1520
489424
144415
216867
1.37
2.60
0.71
Refinary utlization rate was 94.50% in the last week of November 2015
MONTHLY CHANGE IN SHFE STOCKS (OCT-NOV 2015)

Copper
Lead
Zinc
Nickel
Change (in tonne)
-10615
-2048
-3114
10018
27th November 2015
187152
13230
168936
38712
Change (in %)
-5.37%
-13.40%
-1.81%
34.91%
MONTHLY CHANGE IN LME STOCKS (OCT-NOV 2015)

Copper
Lead
Zinc
Nickel
Change (in tonne)
-23400
-19225
-26075
-17670
30th November 2015
244375
128325
545375
408360
Change (in %)
-8.74%
-13.03%
-4.56%
-4.15%
NoteLME: London Metal Exchange , SHFE: Shanghai Futures Exchange, DOE: Department of Energy (US)
Crude oil: Likely to fall further as OPEC didnt cut production level
Key points
OPEC agreed to set a new oil output ceiling of 31.5mbpd, in line with the groups most recent production estimate; the previous
output target was 30mbpd (estimates do not include Indonesia)
OPEC: World oil demand is expected to grow by 1.50mbpd in 2015 to average 92.86mbpd
OPEC: In 2016, world oil demand growth is seen reaching 1.25mbpd to average 94.14mbpd
Iranian oil minister: The country will "very soon" reach near 4mbpd
OPEC: Non-OPEC supply to see a contraction of 0.13mbpd to average 57.11mbpd in 2016
OPEC: For the first three quarters of 2015, the estimated global inventories saw a strong build-up of around 285mb or 1.0mbpd
IEA: Global oil demand to slow down from the current 2.1mbpd seen in 3Q 2015 to just 1.2mbpd by 2016
Crude oil
CMP: $39.97
Crude oil managed to eke out a gain of over 2% in the last month on a declining number of US oil rigs, geopolitical concerns over the
developments in the Middle-East and hope that the Organization of Petroleum Exporting Countries (OPEC) would take an action to
reduce the supply as the world faces an oil glut. Strength in crude oil was at odds with the other commodities that declined. OPEC
belied the hopes of a production cut as the group increased the production limit to 31.50mbpd from the previous target of 30mbpd.
Crude oil fell in response to the policy decision. OPECs policy is squeezing incomes for its members. The International Energy Agency
has warned that the members combined annual revenue could fall to $550 billion from an average of more than $1 trillion in the past
five years. Crude oil is vulnerable as Chinas economy remains weak and the US economy is in a Goldilocks kind of state. Crude oil
falling to $30 level would impair the Russian economy. Despite declining rigs, the commodity can decline to the $35 level while strong
resistance is seen around $45.
December 2015
24
MONTHLY VIEW
COMMODITY
FUNDAMENTALS
Bullion: rate hike mostly discounted, still possibility of further decline

Key points
India's November gold imports said to double on slump in prices
Gold rebounds from 2010 lows on dollar after ECB rate decision
At 1.4 million ounces the market is now in its biggest net short position ever on gold
US imports of precious metals and jewellery increased at a double-digit pace in Q3
Gold industry in denial on debt, losses, and needs to explore more: Randgold
US mint American Eagle gold coin sales surge in November, silver at record
China adds 14 tonne gold bullion to its foreign exchange reserves in October
Industrial metal production cuts to support silver as 40% silver is mined as a secondary metal from production of other metals
Chinas silver imports in 2015 likely to be the highest since 2011
Gold
CMP: $1,086 (spot)
Gold prices fell nearly 7% as the US Dollar Index hit a 12-year high on Fed rate hike expectations. The yellow metal fell to a fresh cycle-low of
$1,052 and to the lowest level since 2010. Shanghai Gold Exchange (SGE) deliveries, as reported last Friday are robust, thus indicating good
demand. Chinas net imports of gold from Hong Kong dropped for the first time in four months in a holiday-shortened October. The rising US
treasury yields would pressurise the metal as the US Federal Reserve (Fed) moves on for a rate hike. Risk aversion coming on geopolitical concerns
(ISIS, Middle-East, terrorism) would provide intermittent support. One possible support to gold might come from the slower than expected pace
of rate hike by the Fed. Although a rate hike has been discounted to a great extent, further decline is not ruled out. The expected near-term range
is $1,050-1,100, with a possibility of decline to $1,000 if the Fed becomes hawkish.
Silver
CMP: $14.55 (spot)
Like gold, silver too fell to a fresh cycle-low below $14 on the strength in the dollar amid a commodity-wide sell-off. Weakness in crude
oil and the base metals doesnt bode well for the white metal. However, Chinas imports could rise to the highest level since 2011 which
is supportive for the metal. We see the metal trading between $14 and $15 in the near term, with the possibility of falling to $13.50 should
the Fed hint at a quicker pace of rate hike.
Base metals: fail to surge on production cuts as weak Chinese economy and strong dollar dominate
Key points
ICSG: Copper market metal balance in surplus of 16,000 ton in August, total production surplus at 80,000 ton in the January-August period
against a deficit of 4,60,000 ton in the same period of 2014
EIU: Global copper consumption growth forecast to moderate at 2.2% against 7.7% in 2014
Codelco slashed its 2016 China copper premium to $98/ton from $133/ton offered in 2015 signifying weak demand outlook
ILZSG: Lead market refined metal balance in surplus lowered to 13k ton in January-September period against surplus of 22k ton in the
corresponding period of 2014
EIU: Global refined lead consumption forecast to decline by 2.2% in 2015 from 1.8% in 2014 on Chinese battery destocking and slowing
momentum in auto sales in China
ILZSG: Zinc production surplus balance widened to 188k ton in January-September 2015 against a deficit of 291k ton in the same period
of 2014
EIU forecast global zinc demand to slow to 3.3% in 2015 from 4.5% in 2014 while global zinc supply to rise by 5.5% in 2015
EIU: Global nickel consumption to rise to 1.907k ton in 2015 from 1.700k ton in 2014 on stock replenishment efforts by China post-ban
by Indonesia in early January 2014
Copper
CMP: Rs312/kg (February 2016 contract)
MCX copper lost almost 10% of its value in November, most in 2015 as weak Chinese demand and growing surplus weighed on the price. As per
Economist Intelligence Unit (EIU), Chinas apparent consumption in the January-September 2015 period grew by 3% year on year (YoY) on account of
lower financing activity. Chinas October copper imports grew by 12.3% YoY at 343,473 ton. As per EIU, recent production cuts and planned mine
closures on account of lower prices could affect the copper supply by 870,000 ton. Copper stocks in the London Metal Exchange (LME) warehouses have
come down by 10% to 244,375 ton in November end from 267,775 ton at the start of the month. As Feds December rate hike probability has increased
the demand for copper remains weak and producers focus on cost reduction rather than supply cuts, we expect copper prices to remain depressed. Copper
price is expected to trade in the range of Rs336/kg on the higher side and Rs283/kg on the lower side in the current weakness.
Lead
CMP: Rs112.90/kg (December 2015 contract)
Lead relatively suffered less losses compared with the other base metals with the price recovering from the low of Rs102.50 in the past month closing above
the Rs108/kg support, as we had mentioned in our last monthly outlook column. Lower surplus forecast is helping prevent a further fall in the prices. With
weak demand leads supply has also been lower with the refined lead supply forecast by EIU at 10.678k ton in 2015 against 10.925k ton in 2014. We expect
lead to trade in a range of Rs103/kg to Rs116/kg on the higher side.
Zinc
CMP: Rs103.20/kg (December contract)
Zinc lost almost 5% in the last month ending at Rs103.10/kg, recovering from the lows of Rs98/kg as a growing metal balance surplus has led zinc to lose
its premium against the other base metals. Glencores plans to cut zinc output by almost 4% of the global supply failed to prop the prices as Vedanta
25
December 2015
COMMODITY
FUNDAMENTALS
MONTHLY VIEW
Resources plans to produce 1mn ton of zinc and lead. Simultaneously, Chinas zinc supplies are forecast to increase to 6,388k ton, almost up by 10% over
2014. Chinas zinc smelters have pledged to cut their output by a fifth, almost 500k ton in 2016, which would still mount to only 3.5% of global supplies.
We expect zinc price to remain under pressure with the price expected to test Rs95/kg on the lower side while Rs111/kg could be the hurdle on rallies unless
we see more production cuts.
Nickel
CMP: Rs602/kg (December contract)
Nickel remained the worst performer amongst the base metals losing almost 12% of its value in November, ending the month at Rs586/kg. It
made a new 12-year low, last seen in 2003 on the LME at $8,200/ton. We expected nickel to hold the sub-Rs600/kg area, however the prices still
dived on Fed rate hike concerns and Chinas plan to move to consumption-based rather than export-based manufacturing hub. However, as per
reports, almost 50% of the nickel producers remain unprofitable at the lower levels. We expect nickel to become attractive at Rs570/kg levels for
the upper target of Rs760/kg. The near-term range is expected to be Rs570-650.
CMP as on December 04, 2015
Events watch: Major economic events in December 2015

Region
Event
Survey
Actual
Prior
1/12/2015
Date
China
Manufacturing PMI
49.9
49.6
49.8
1/12/2015
USA
ISM Manufacturing PMI
50.6
48.6
50.1
3/12/2015
USA
ISM Non-Manufacturing PMI
58.1
55.9
59.1
4/12/2015
All
OPEC meetings
4/12/2015
USA
Non-farm employment change
201K
211K
298K
8/12/2015
China
Trade balance
388.4B
393B
9/12/2015
China
CPI YoY
1.40%
1.30%
11/12/2015
11/12/2015
Europe
USA
Targeted LTRO
Core retail sales MoM
0.30%
15.5B
0.20%
11/12/2015
USA
Prelim UoM consumer sentiment
92
91.3
12/12/2015
China
Industrial production YoY
5.70%
5.60%
15/12/2015
Europe
German ZEW economic sentiment
10.4
15/12/2015
USA
CPI MoM
-0.10%
0.20%
16/12/2015
USA
Housing starts
1110K
1060K
17/12/2015
USA
FOMC statement
17/12/2015
USA
Federal funds rate
17/12/2015
USA
FOMC press conference
17/12/2015
USA
Philly Fed Manufacturing Index
1.9
18/12/2015
Japan
Monetary policy statement
22/12/2015
22/12/2015
Europe
USA
German Flash Manufacturing PMI

Final GDP QoQ
52.6
3.90%
22/12/2015
USA
Core durable goods orders MoM
0.50%
December 2015
0.50%
0.25%
26
Impact
Weaker than expected data highlight the ongoing weakness in China's economy; despite
rate cuts the economy is yet to gather steam; the number spells weakness in the industrial
commodities and gives rise to expectations of further rate cuts
The data shows unexpected contraction in the US manufacturing which is a bearish
development for the industrial commodities
Even ISM manufacturing data trailed the forecast which spells a possible slowdown in the US
economy as the services sector contributes nearly two-third of the US economy; ISM
manufacturing already showing contraction; implications are bearish for the industrial commodities
The OPEC belied expectations of production cuts; the organisation instead increased the
production ceiling to 31.50mbpd from the existing 30.50mbpd; although the revised ceiling
is close to the current production level, absence of production cuts would add to the concerns
of the supply glut, thus overall impact is seen bearish
The data topped the forecast; also, the previous two months' data revised higher by a
combined 35,000 jobs; the participation rate also ticked higher; overall, the report is bullish
for the dollar and the industrial commodities; still, as the first rate hike is mostly discounted,
the focus would be on the pace of further rate hikes
The trade balance data has been reflecting weakness in both China's and the other global
economies; both import and export figures need to be analysed to understand the demand
in both the economies; disappointing data would be bearish for the industrial commodities
Lower than expected data would stoke the concerns of disinflation and a weak economy;
thus, industrial commodities could fall, though expectations of further rate cuts on weak
data would limit the downside
Weaker than expected number would spell weakness in the euro
Disappointing retail sales in the holiday period would be considered as a sign of weak
demand which would be bearish for the industrial commodities
Better than expected data would weigh on bullion and be supportive for the industrial
commodities and the dollar
Chinese economy is showing weakness, thus the industrial production growth rate is coming
down; data trailing the forecast would be bearish for the industrial commodities, bullions
could gain on the speculation the Fed would be slow in hiking rates
High economic sentiment bodes well for the economy, thus data topping the forecast would
be positive for the euro as it would lessen the chance of further expansion in stimulus;
industrial commodities would benefit too
Lower than expected data would mean that the Fed would be restrained in its rate hike
drive, thus would be bearish for the dollar and bullish for the commodities in general,
especially bullions
Better than expected data would be supportive for the dollar and bearish for the bullions;
the industrial commodities could initially fall on the stronger dollar, however would eventually
bounce back on improved demand prospects as reflected by the data
The market participants would be looking for clues to the pace of the rate hike by the Fed;
a hawkish Fed would be bullish for the dollar and bearish for commodities in general,
especially for the bullion complex
A rate hike of 0.25% expected, which is already discounted to a great extent; thus, the
major focus would be on the FOMC statement
The market participants would be looking for the clues to the pace of the rate hike by the
Fed; a hawkish Fed would be bullish for the dollar and bearish for commodities in general,
especially for the bullion complex
The index is a key manufacturing index, thus better than expected data would be encouraging
for the industrial commodities The dollar would also benefit
The BoJ has already signalled flexibility in the stimulus programme; a dovish BoJ would be
bearish for the yen and bullish for the risk assets; bullions could fall in that case
Better than expected data would boost the industrial commodities and the euro
Data beating the forecast would be positive for the dollar as it would increase the possibility
of quicker rate hike by the Fed; the bullion would fall while the industrial commodities likely
to rise after initially falling on the stronger dollar
Weaker than expected data would be bearish for the dollar and bullish for the bullion complex;
industrial commodities would fall
MONTHLY VIEW
COMMODITY
FUNDAMENTALS
Floods in Tamil Nadu lead to severe crop damage concerns

Rabi crop sowing in India (figs in lakh hectares)
News highlights
Sowing of rabi crops stands 15.6% lower at 37.3 million ha
Sugar production in Oct-Nov up 24% at 23.60 lakh tonne
India's cotton output to decline to 370.50 lakh bales due to

whitefly attack
Maharashtra releases 57,157 tonne of seized pulses, expected

to enter market next week
Crop
Area sown in 2015-16
Area sown in 2014-15
Wheat
152.56
208.64
Pulses
100.42
106.93
Coarse cereals
46.71
43.04
Oil seeds
61.89
69.01
Rice
8.7
11.15
Total
370.28
438.77
Castor seed
Castor seed December futures largely remained in the grip of bears
in November 2015. The prices declined taking cues from an increase
in the total crop area covered under castor seed coupled with
expectations of a higher output. There are expectations of an early
arrival of the crop. The arrivals usually start in January. However,
this year it is expected to hit the markets in December itself. Castor
seed acreage till the end of sowing stood at 1.11 million hectare
(ha) compared with 1.02 million ha, up about 8.4%. The prices
declined from Rs4,446 per quintal in the second week of November
to Rs3,735 towards end of the month. However, the prices recovered
from the lower levels on short coverings and profit taking by short
sellers. The prices settled 11.97% lower month on month at
Rs3,854. The demand from plants remains good due to robust castor
oil exports.
Chana
Chana December futures traded on a mixed note in November this
year. The prices gained in the beginning of the month taking cues
from the festive demand ahead of Diwali coupled with tight supplies
in the physical markets, lower arrivals and forecast of lower output
of kharif pulses. The prices gained from Rs4,930 in October end to
Rs5,288 in the first week of November. However, the prices
witnessed some respite with imports trickling in. Also, good sowing
progress of chana put pressure on the prices. Various state
governments have started to release the seized stocks in the markets
which further helped ease the prices. The prices declined to Rs4,867
in the third week of the month and settled 2.03% higher at Rs5,030
at the end of the month. Currently chana sowing is in progress and
is complete at 69.25 lakh ha as on December 4, 2015, up 0.5%
compared with 68.92 lakh ha during the corresponding period of
the last year.
Price performance
Commodity
Expiry
Castor seed
Nov 30,
2015 (Rs)
Oct 30,
2015 (Rs)
% Change
Dec
3854
4378
(11.97)
Chana
Dec
5030
4930
2.03
Cotton seed oil cake
Dec
1712
1657
3.32
Dhaniya
Dec
10277
9807
4.79
Guargum
Dec
6560
8180
(19.80)
Guar seed
Dec
3366
3837
(12.28)
Jeera
Dec
15815
16200
(2.38)
Kapas
Apr '16
856.50
872.5
(1.83)
RM seed
Dec
4748
4913
(3.36)
Sugar
Dec
2703
2748
(1.64)
Soya bean
Dec
3819
3909
(2.30)
Ref soy oil
Dec
618.70
617.45
0.20
Turmeric
Dec
9120
8984
1.51
Soya bean
Soya bean December futures on the NDCEX traded on a mixed
note with some negative bias in November. The prices found support
at the lower levels due to a good demand from the crushers due to
good demand for oil ahead of the festive season. Crop damage due
to poor monsoon rainfall also led to a lowering of the production
estimates. However, the prices declined from the higher levels as
poor export demand for Indian soya meal pressurised them. The
demand from the crushers also diminished. The prices in the global
markets weakened on the back of higher global supplies due to a
record output in the USA. Soya bean from the USA has started to
enter the markets. Sowing operations in Brazil and Argentina are
also in full swing which has also pressurised prices.
27
December 2015
COMMODITY
TREND & VIEW
TECHNICALS
Gold: Bulls warmed up
Gold has formed a large ending diagonal pattern spanning

several months.
KST (-4.80888)
5
0
-5
-10
2000
Recently it formed the last leg of the pattern on the downside.

The pattern would mark the end of the correction at least over
the short to medium term.
1950
1900
1850
1800
1750
1700
At the lower end of the pattern the yellow metal formed a bullish
outside bar in the last week.
1650
The low of $1,045 will now act as a major support.
1450
From the medium-term perspective, the key levels on the upside

will be $1,165-1,190.
1350
1600
1550
1500
1400
1300
1250
1200
1150
1100
1050
View
Up
Reversal
Supports
Resistances
Target
$1,045
$1,074/$1,057
$1,098/$1,140
$1,165/
$1,190
1000
2012
A M J
S O N
D 2013
A M J
J A
S O N
D 2014
A M
J J
S O
N D 2015 M A M J
A S O
N D 2016
M J J
A S
Silver: Poised for a rally
Silver had formed an ending diagonal pattern and broken out on

the upside. However, the break-out couldnt lead to a larger
upside.
Relative Strength Index (42.2936)
60
50
40
30
20
SILVER [CASH] (14.0400, 14.6190, 13.7900, 14.5490, +0.48900)
32
After the spike silver formed a correction once again and fell
back towards the low of $13.93.
31
30
29
28
27
Structurally, silver seems to have formed a larger ending diagonal

pattern. Near the low bulls have rushed in to provide support to
the commodity. Thus, it has bounced sharply and formed a bullish
outside bar on the weekly chart.
26
25
24
23
22
21
20
19
The low of $13.79 will now act as a crucial support. On the higher
side, $16.03-16.36 will be the target area to watch out for.
18
17
16
View
Up
Reversal
Supports
Resistances
Target
$13.79
$14.22/$13.93
$15.00/$15.66
$16.03/
$16.36
15
14
13
N
2013
2014
M A
2015
M A
2016
M A
M J
Crude oil: Scope for bulls
NYMEX crude oil had formed a triangle, which broke out on

the upside. However, the break-out couldnt lead to a significant
upside.
KST (-4.06473)
5
0
-5
-10
LIGHT CRUDE CONTINUOUS 1000 BARRELS [NYMEX] (41.3100, 42.0000, 39.6000, 39.9700, -1.11000)
From the high of $50.92 crude oil has fallen back significantly.
In terms of Fibonacci retracement, the fall has made a 78.6%
retracement, ie retraced till $40.60. It has also reached the lower
end of the falling channel. However, the short-term momentum
indicator is not in keeping with the price action as it is showing
a positive divergence.
56.5
56.0
55.5
55.0
54.5
54.0
53.5
53.0
52.5
52.0
51.5
51.0
50.5
50.0
49.5
49.0
48.5
48.0
47.5
47.0
46.5
46.0
45.5
45.0
44.5
44.0
43.5
43.0
42.5
42.0
41.5
41.0
40.5
40.0
39.5
39.0
38.5
38.0
37.5
37.0
36.5
36.0
35.5
0.0%
23.6%
38.2%
50.0%
The low of $37.75 will act as a major support. On the other

hand, a key level for a potential bounce will be $44.80; beyond
that the oil can test the high of $50.92.
61.8%
78.6%
100.0%
View
Reversal
Supports
Resistances
Target
$37.75
$38.95/$38.16
$43.46/$44.40
$44.80/
$50.92
Up
December 2015
20
28
27
3
10
Augus t
17
24
31
8
14
Septem ber
21
28
5
October
12
19
26
2
9
Novem ber
16
23
30
7
Decem ber
14
21
28
4
2016
TREND & VIEW
COMMODITY
TECHNICALS
Copper: Bounce around the corner
COMEX copper has been in a multi-month correction, which is

unfolding in a channelised manner.
Relative Strength Index (38.1853)
70
60
50
40
30
Recently it took support near the lower end of the channel and
now looks poised for a bounce.
20
3.15
HG COPPER CONTINUOUS 25000 LBS [COMEX] (2.05900, 2.09700, 2.04200, 2.07900, +0.01800)
3.10
3.05
3.00
100.0%
2.95
2.90
On the weekly chart the red metal has formed a bullish inside
bar.
2.85
2.80
2.75
2.70
61.8%
2.65
2.60
50.0%
The short-term momentum indicator is recovering from the

oversold zone whereas the medium-term momentum indicator is
still in the oversold region and needs to cool off.
2.55
2.50
38.2%
2.45
2.40
23.6%
2.35
2.30
2.25
0.0%
2.20
Thus, unless the low of $2.00 breaks, copper can attempt a bounce
till $2.24-2.28 levels.
2.15
2.10
2.05
2.00
1.95
1.90
3
View
Up
Reversal
Supports
Resistances
Target
$2.00
$2.04/$2.02
$2.11/$2.17
$2.24/
$2.28
20
27
4
May
11
18
26
8
June
15
22
29 6
July
13
20
27
3
10
Augus t
17
24
31 8
21
Septem ber
28
5
12
October
19
26
2
9
16
Novem ber
23
7
14
Decem ber
21
28
4
2016
Jeera: Battle continues
NCDEX jeera has been trading in a sideways manner for the last
several weeks. The consolidation has taken support near the
weekly lower Bollinger Band.
KST (0.77846)
15
10
5
0
-5
On the higher side, the junction of the 40-week exponential

moving average and the weekly upper Bollinger Band is putting
pressure on the agri-commodity. The recent price action is
unfolding in a channelised manner. The short-term momentum
indicator has given a fresh sell signal whereas the medium-term
momentum indicator has completed the pull-back cycle.
JEERA QUINTAL - 1 MONTH (15,935.00, 15,935.00, 15,725.00, 15,790.00, +15.0000)

20000
19500
19000
100.0%
18500
18000
17500
61.8%
17000
50.0%
16500
38.2%
16000
Thus, unless the swing high of Rs16,280 is crossed jeera is

expected to head lower. On the downside, Rs14,980-14,850 will
be the area to watch out for; below that the low of Rs14,400 will
be on radar.
15500
23.6%
15000
14500
0.0%
14000
13500
View
Reversal
Supports
Resistances
Target
Down
Rs16,280
Rs15,485/
Rs14,980
Rs16,000/
Rs16,180
Rs14,850/
Rs14,400
13000
13 20
0
April
27 5
11
May
18
25
1
8
June
15
22
29 6
July
13
20
27
3
10
August
17
24
31 7
14 21 28 5
12
Septem ber
October
19 26
2
9
16
Novem ber
23 30 7
14
Decem ber
21
Soyabean: Correction underway
NCDEX soya bean rallied smartly for several weeks. The price
was moving up along with the daily upper Bollinger Band.
MACD (-16.2293)
100
0
-100
SOYBEAN QUINTAL - 1 MONTH (3,699.00, 3,707.00, 3,646.00, 3,674.00, -6.00000)
However, the commodity hit the 78.6% retracement of the

previous fall. A crucial medium-term falling trend line was also
nearby. Near these hurdles bears put up a strong resistance. Thus,
the commodity has entered a correction mode.
100.0%
78.6%
0.0%
4050
4000
3950
61.8%
4600
4550
4500
4450
4400
4350
4300
4250
4200
4150
4100
The fall is breaking up into lower degree waves. Recently it broke

the swing low of Rs3,725.
3900
23.6%
3850
3800
3750
50.0%
38.2%
3700
3650
3600
50.0%
38.2%
3550
The commodity is heading for a deep retracement of the previous

rise, ie the 61.8% (Rs3,465) and the 78.6% (Rs3,290)
retracement marks. On the other hand, the level 3819-3850 will
act as a key resistance zone.
3500
61.8%
3450
3400
23.6%
3350
3300
78.6%
3250
3200
3150
3100
0.0%
100.0%
3050
3000
2950
View
Down
Reversal
Rs3,850
Supports
Rs3,640/
Rs3,513
Resistances
Rs3,725/
Rs3,768
Target
2900
2850
30
13
April
Rs3,465
29
27
11
May
18
25
1
8
June
15
22
29 6
July
13
20
27
3
10
August
17
24
31 7
14 21
Septem ber
5
12
October
19
2
9
Novem ber
23
7
14
Decem ber
21
28
4
2016
December 2015
CURRENCY
FUNDAMENTALS
MONTHLY VIEW
Currencies: Rupee down on anticipation of Fed rate hike in December

Key points
Indias CPI rose to 5.0% in October from 4.4% in September, IIP
grew by 3.6% in September from 6.3% in August
Indias trade deficit narrowed to $9.76 billion in October from $13.5
billion in the same month last year
Indias WPI stood at -3.8% in October from -4.5% in September in 2015
Indias GDP grew by 7.4% in Q2FY2016 compared with 7.0% in
Q1FY2016
November 2015 contract price movement
CURRENCY LEVELS IN NOVEMBER 2015 (IN RS)

Currency
High
Low
Close
Monthly chg (%)
USD-INR
66.67
65.11
66.57
2.52
EUR-INR
72.37
70.24
70.62
-1.74
GBP-INR
101.63
99.10
100.39
1.15
JPY-INR
54.44
53.32
54.30
0.53
November 2015 contract price movement
USD-INR
CMP: Rs66.69 (spot)
The Indian Rupee depreciated in the previous month on the back of a strong dollar. Hawkish statements from the US Federal Reserve (Fed)
officials and upbeat economic data from the USA fuelled expectations among investors that the central bank might raise interest rates in December this year. The defeat of the Bharatiya Janata Party (BJP) in the Bihar assembly election kept the rupee under pressure. Unfavourable macroeconomic data, geopolitical tension and a rise in risk aversion in the domestic market increased the downside pressure.
Outlook: The rupee is expected to trade with a negative bias on the back of a strong dollar and a rise in risk aversion in the domestic markets. The Reserve Bank
of India (RBI) kept its policy rates unchanged in line with market expectations. A hawkish statement from the Fed Chair Janet Yellen and upbeat economic data
from the USA fuelled expectations among investors that the central bank would raise the rates in December. Investors will remain cautious ahead of the Federal
Open Market Committee (FOMC) meeting. The demand for dollars from importers would prove negative. As per the latest REER reading (provisional;
113.00), the rupee is overvalued by more than 10%. The expected trading range in the near term is 65.4-68.80.
GBP-INR
CMP: Rs100.76(spot)
The pound depreciated by 2.3% against the dollar as the Bank of England (BoE) in its inflation report signalled that interest rates are likely to
remain on hold and inflation is forecast to remain lower than previously expected until late 2017. Further, downbeat economic data from the UK
and a divergence in the monetary policy of the global central banks added to the downside pressure.
Outlook: The pound is likely to trade with a negative bias on the divergence in the monetary policies of the global central banks and mixed economic data from
the UK. The Fed is expected to increase the rates in December whereas the BoE is likely to continue with its loose monetary policy. Investors fear that a lower
inflation rate may force the BoE to hold back its decision to raise interest rates in the next year. The expected trading range in the near term is 98.5-102.5.
EUR-INR
CMP: Rs72.54 (spot)
The euro depreciated by 4.0% against the dollar on the back of a divergence in the monetary policies and downbeat economic data from the euro
zone. The single currency tumbled after the European Central Bank (ECB) President Mario Draghi indicated that the ECB could extend the scope
for its comprehensive asset-purchasing programme to revive economic growth and fight deflation. Further, investors were concerned over security
in Europe after a terrorist attack in Paris.
Outlook: The euro is expected to trade with a negative bias on the back of a strong dollar and unfavourable economic data from the euro zone. The market
expects the Fed to hike interest rates in this December after upbeat economic data. The market fears that falling crude oil prices may put deflationary pressure
on the countries struggling with lower inflation, calling for further easing. However, a sharp downside may be cushioned as the ECB kept its benchmark interest
rates unchanged and did not increase the pace of its EUR60-billion-a-month quantitative easing programme. The expected trading range in the near term is
70.1-74.0.
JPY-INR
CMP: Rs54.28 (spot)
The yen depreciated by 2.09% against the dollar on disappointing gross domestic product (GDP) data and a divergence in the global monetary
policies. Japans GDP contracted by 0.2% in Q3 of 2015 from -0.3% in Q2 of 2015. Investors anticipated that unfavourable economic data from
Japan may force Bank of Japan to introduce more monetary stimulus to revive economic growth. However, a sharp fall was prevented as Bank
of Japan kept its monetary policy unchanged and geopolitical tension led to a rise in the demand for safe haven.
Outlook: The yen is expected to trade with a negative bias on the divergence in the global monetary policies and a strong dollar. The dollar is showing strength
as upbeat economic data from the USA boosted optimism over the strength of the economy. Soft economic data from Japan may prove unfavourable for the
yen. The market expects the Fed to hike interest rates in December whereas Bank of Japan is likely to continue with its loose monetary policy until it achieves
its 2% inflation target. The expected trading range in the near term is 53.0-56.0.
CMP as on December 04, 2015
December 2015
30
TREND & VIEW
CURRENCY
EUR-INR: Bulls take charge
USD-INR: Heading higher
The USD-INR had broken out from a bullish flag pattern after
which it formed an impulse on the upside.
After the sharp rally the price entered a short-term correction
mode. It retraced 61.8% of the rally and found support near
the trend line. From there it has started the next leg on the
upside. This leg is sub-dividing into lower degree waves.
The daily momentum indicator is in bullish mode. The currency
pair has tested the high of 66.90. It faced selling pressure at
that level; however, the minor degree correction can be taken
as a buying opportunity.
The key level on the upside will be 67.44; overall, it can stretch till
68.50. A reversal can be considered below 66 on a closing basis.
The GBP-INR had surpassed a medium-term falling trend line in

August 2015. However, it couldnt sustain in the higher territory.
The currency pair fell back to retest the trend line. In the last few
sessions it seems to have formed a short- to medium-term base
near the trend line and the key weekly moving averages (WMAs).
The weekly momentum indicator has completed the correction
cycle and is poised for a new cycle on the upside.
View
USD-INR
Up
The EUR-INR formed a multi-month channelised three-wave

pull-back. From the high of 78.21 it entered the correction mode.
The correction formed a deep retracement of the rise. However,

the correction now looks complete and the currency pair has
resumed a larger up trend.
It has crossed a medium-term falling trend line. The short-term

momentum indicators are in line with the bullish break-out.
A key level on the upside will be the weekly upper Bollinger

Band, ie 75.80; beyond that the high of 78.21 will be on radar.
On the other hand, the low of 70.05 will act as a major support.
The 98.50-98.20 level will act as a major support zone in the

short to medium term. On the higher side, 103 and105 will be
the short-term and medium-term targets respectively.
Currency
JPY-INR: Bullish outlook
GBP-INR: Bulls warming up
TECHNICALS
For several weeks the JPY-INR was trading in a sideways manner. It

formed a short- to medium-term base for itself and formed a sharp
rally in August this year.
From the high of 0.5735 the currency pair entered a correction mode.
It formed a triangular pattern and broke out on the downside.
Overall, it formed a complex correction from the high and retraced
61.8% of the previous rise. From that key Fibonacci level the currency
pair seems to have started a fresh rally. From medium-term perspective
0.5559 and 0.5621 will be the key levels on the upside. A reversal of
the bullish view can be placed below 0.5338 on a closing basis.
Reversal
Supports
Resistances
Target
66.00
66.37/66.04
66.99/67.50
67.44-68.50
GBP-INR
Up
98.20
99.80/99.11
101.68/102.44
103-105
EUR-INR
Up
70.05
71.64/70.95
73.30/74.52
75.80-78.21
JYP-INR
Up
0.5338
0.5380/0.5361
0.5464/0.5515
0.5559-0.5621
31
December 2015
PMS
DESK
PMS FUNDS
Portfolio Management Service

We are pleased to introduce you to Sharekhans Portfolio
Management Service (PMS) in which we completely manage
your investment portfolio so that you stop worrying about
the market volatility and focus your energy on things that
you like to do!
We have the following strategies on offer:
We have a wide range of strategies that you can choose from.

Our strategies are based on fundamental research and technical analysis.
ProPrime (based on fundamental research)
Top Equity
Diversified Equity
ProTech (based on technical analysis)

Index Futures Fund
Trailing Stops
PROPRIME - DIVERSIFIED EQUITY

Product performance
as on November 30, 2015
OVERVIEW
The ProPrimeDiversified Equity PMS strategy is suitable for long-term investors
looking to create an equity portfolio through disciplined investments that will lead to a
growth in the portfolios value with medium to high risk.
INVESTMENT STRATEGY
Disciplined investment decisions are taken in specific stocks based on thorough

fundamental research.
Investments are made primarily in the Nifty Fifty or the BSE 100 scrips.
Attempts to have an exposure of minimum of 70% in the Nifty Fifty stocks and
that of minimum of 90% in the BSE 100 stocks.
Endeavours to create a core portfolio of blue-chip companies with a proven track

record and have partial exposure to quality companies in the mid-cap space.
(In %)
Scheme
S&P CNX 500
1 month
0.7
-1.0
3 month
6.5
0.3
6 month
5.1
-3.9
1 year
0.1
-3.4
Best month
36.3
34.4
Worst month
-23.4
-27.2
Best quarter
60.3
51.2
Worst quarter
-30.5
-28.6
Disclaimer: Returns are based on a clients

returns since inception and may be different from
those depicted in the risk disclosure document.
Top 10 stocks
PRICING
Minimum investment of Rs25 lakh
Charges
Apollo Tyres
Axis Bank
Federal Bank
2% per annum; AMC fee charged every quarter
Hero MotoCorp
0.5% brokerage
ICICI Bank
20% profit sharing after the 12% hurdle is crossed at the end of
every fiscal
Il&Fs Transport. Networks

IndusInd Bank
Lupin
Reliance Industries
Sun Pharmaceutical Industries
FUND OBJECTIVE
A good return on money through long-term investing in quality companies
December 2015
32
PMS
DESK
PMS FUNDS
PROTECH - INDEX FUTURES FUND

OVERVIEW
The ProTechIndex Futures Fund PMS strategy is suitable for long-term investors
who desire to profit from both bullish and bearish market conditions. The strategy
involves going long (buying) or going short (selling without holding) on Nifty futures
by predicting the market direction based on a back-tested automated model.
Product performance
(In %)
INVESTMENT STRATEGY
The strategy has the potential to generate profits irrespective of the market
direction by going long or short on Nifty futures.
An automated basic back-testing model is used to predict the market direction

for the Nifty which then decides the strategy to be deployed in terms of going
long or short.
The portfolio is not leveraged, ie its exposure never exceeds its value.
Scheme
Sensex
Nifty
1 month
2.1
-1.9
-1.6
3 months
6.6
-0.5
-0.5
FY14-15
-3.4
24.9
26.7
FY13-14
8.8
18.9
18.0
FY12-13
3.7
8.2
7.3
FY11-12
13.1
-10.5
-9.2
FY10-11
9.2
10.9
11.1
FY09-10
14.7
80.5
73.8
168.3
158.3
162.6
Since inception*
Best month
28.9
-23.9
-26.4
Worst month
-17.1
0.0
0.6
Charges
Best quarter
33.3
49.3
42.0
Worst quarter
-11.7
17.3
22.3
PRICING
AMC fees:
0%
Brokerage:
0.05%
Profit sharing:
Flat 20% charged on a quarterly basis
*01-Feb-2006

Investments in
FUND MANAGERS VIEW
Nifty Index
While market volatility continued to contract, the Nifty managed to move in one
direction since its October 2015 high. That has helped rein in a good trend. The
Index Futures Fund (IFF) is based on a trend-following model and therefore a clear
trend of this nature was good to capture. The 2.12% return of November comes on
the back of that. It has been our expectation that the market will continue to trend
more than ever before. We still believe that volatility is very low and there is a lot of
room for bigger trends in the market. As that happens, returns should expand on this
product.
Our market view has been bearish overall though we expect rallies from time to time.
This makes it difficult for most people except for the most trained vigilant traders.
With position sizing and risk management it is possible to steer around such markets.
Fund Manager: Rohit Srivastava
FUND OBJECTIVE
Absolute returns irrespective of market conditions.
33
December 2015
PMS FUNDS
PMS
DESK
PROTECH - TRAILING STOPS

OVERVIEW
Our ProTechTrailing Stops PMS strategy is ideal for Traders and Investors looking for Regular Income from trading and desire to make profits in both bullish and
bearish market conditions. It is designed to payout book profits on monthly basis.*
It is also for those investors who are looking for better income than Fixed Income
or Deposits. This strategy involves going Long (buying) or Short (selling without
holding) on stock futures.
Product performance
(In %)
* Terms and conditions apply
INVESTMENT STRATEGY
Scheme
Sensex
Nifty
1 month
1.2
-1.9
-1.6
3 months
3.4
-0.5
-0.5
This strategy spots the winning trades based on technical analysis vs time framebased portfolios, basically the momentum calls.
FY14-15
-3.7
24.9
26.7
FY13-14
-1.1
18.9
18.0
A risk model has been developed for stock portfolio allocation that reduces the
risk and portfolio volatility through staggered building of positions.
FY12-13
14.9
8.2
7.3
It is non-leveragedthe exposure will never exceed the value of the portfolio.
FY11-12
29.0
-6.1
-4.6
FY10-11
FY09-10
50.2
41.1
43.0
Best month
9.1
11.3
12.4
Worst month
-4.4
-2.0
-1.7
PRICING
Charges
Since inception*
AMC fees:
0%
Best quarter
9.9
-12.7
-12.5
Brokerage:
0.05%
Worst quarter
-8.2
9.2
9.9
Profit sharing:
Flat 20% charged on a quarterly basis
*09th May 2011
FUND MANAGERS VIEW

Trailing Stops should have done better as the market did show a trending nature at
the index level. However, November of 2015 ended with returns of 1.19%. Stocks
were most diverged in the last one month. Some were going up and some down,
many were not correlating with the index. We take a top-down approach while trading
where the index direction is primary. When stocks do not move with the index we do
take a hit and go on the back foot. Therefore, we were less aggressive recently. Despite
that we have been putting out positive returns.

Investments in
Nifty Index
Stock futures
Our market view has been bearish overall though we expect rallies from time to time.
This makes it difficult for most people except for the most trained vigilant traders.
With position sizing and risk management it is possible to steer around such markets.
Fund Manager: Rohit Srivastava
FUND OBJECTIVE
Absolute returns irrespective of market conditions.
December 2015
34
ADVISORY
MONTHLY PERFORMANCE
DESK
Advisory Products and Services

The Advisory Desk is a central desk consisting of a Mumbai-based
expert team that runs various sample model portfolios (for illustrative
purposes only) for clients of all profiles, be they traders or investors.
These products are different from Sharekhans research-based
technical and fundamental offerings as these essentially try to capture
the trading opportunities in stocks where momentum is expected
before or after some event including the announcement of results or
where some news/event is probable.
Advisory products are ideal for those who do not have time to either
monitor the market tick by tick or shift through pages of research for
data or pour over complex charts to catch a trend. However, all
these products require perfect discipline and money management.
For investors
PORTFOLIO DOCTOR
It is a service under which the Portfolio Doctor reviews an existing portfolio based on various parameters and suggests
changes to improve its performance. To avail of this service please write to the Portfolio Doctor at
portfoliodoctor@sharekhan.com.
ALPHA DELIVERY PICKS

This is a long only, cash market delivery product where stock ideas are rolled out based on short-term triggers with
proper fundamental rationales. The buying price range, stop loss and probable target are clearly defined at the time of
initiation. These ideas are for a maximum period of one to two months for the medium-term investor. For more details
of this product please write to us at alphapicks@sharekhan.com.
For traders
SHAREKHANS PRE-MARKET ACTION
These ideas are put out in Sharekhans Pre-market Action report along with stop loss and targets valid for a day. There
is a market watch list of stocks with positive and negative bias for intra-day traders. For more details please write to us
at premarket@sharekhan.com.
MID DERIVATIVE CALLS

These calls are based on the analysis of open interest, implied volatility and put-call ratio in the derivative market. It is
a leveraged product and ideal for aggressive traders. These calls have pre-defined stop loss, targets, time frame and
quantity to execute. For details of the product please write to us at derivative@sharekhan.com.
Report Card
MID performance*
Product
Month
No. of calls
Profit booked
Stop loss hit
Strike rate (%)
MID Derivative Calls performance*

Ticket size (Rs)
Alpha Delivery Picks

Nov 2015
YTD FY2016
42
18
25
43
Month
No. of calls
35
100,000
Nov 2015
YTD FY2016
17
174
Profit booked
98
Stop loss hit

Strike rate (%)
10
41
76
56
December 2015
December 2015
36
MUTUAL FUNDS
DESK
MF PICKS
SHAREKHANS TOP MUTUAL FUND PICKS (EQUITY)
NOVEMBER 13, 2015

Data as on November 03, 2015
Scheme name
Large-cap funds
SBI Bluechip Fund
Birla Sun Life Top 100 Fund
Birla Sun Life Frontline Equity Fund
Reliance Top 200 Fund
UTI Top 100 Fund
Indices
BSE Sensex
Mid-cap funds
SBI Magnum Midcap Fund
Mirae Asset Emerging Bluechip Fund
UTI Mid Cap Fund
Franklin India Prima Fund
L&T Midcap Fund
Indices
BSE MID CAP
Multi-cap funds
Birla Sun Life Pure Value Fund
L&T India Value Fund
Franklin India High Growth Companies Fund
SBI Magnum Global Fund 94
ICICI Prudential Value Discovery Fund
Indices
BSE 500
Tax saving funds
Axis Long Term Equity Fund
Reliance Tax Saver (ELSS) Fund
BNP Paribas Long Term Equity Fund
Franklin India Taxshield
IDFC Tax Advantage (ELSS) Fund
Indices
CNX500
Thematic funds
ICICI Prudential Exports and Other Services Fund
Franklin Build India Fund
Birla Sun Life Special Situations Fund
Religare Invesco Infrastructure Fund
Kotak Infrastructure & Economic Reform Fund
Indices
S&P Nifty (CNX Nifty)
Balanced funds
L&T India Prudence Fund
SBI Magnum Balanced Fund
HDFC Balanced Fund
Franklin India Balanced Fund
DSP BlackRock Balanced Fund
Star
rating
NAV (Rs)
Absolute
6 months
Returns (%)
Compounded annualised
1 year
3 years
5 years
Since inception
28.2
42.8
160.4
23.6
48.1
2.5
1.9
1.0
0.1
-0.4
10.4
5.2
5.2
5.0
5.1
21.5
20.6
19.8
19.5
16.1
11.6
11.8
10.8
10.8
9.2
11.3
15.6
23.4
11.0
12.4
26,590.6
-1.5
-4.6
12.3
5.4
16.3
59.4
30.9
79.5
665.0
87.7
5.9
8.0
3.4
3.1
5.3
19.8
19.2
11.3
15.4
15.1
33.5
33.3
33.2
30.4
29.8
17.6
21.1
17.4
16.2
13.5
18.3
23.6
20.6
21.0
21.3
11,013.5
5.6
10.78
18.32
5.2
22.00
38.7
25.0
29.1
134.4
113.5
6.2
6.9
-0.4
3.0
1.2
9.5
17.0
11.9
17.2
9.7
31.0
29.5
29.4
28.4
28.4
14.9
14.6
14.8
17.2
16.6
19.5
17.0
13.8
15.5
24.2
10,675.9
-0.2
0.5
13.9
5.3
15.2
30.8
44.5
29.4
423.4
37.6
2.5
-4.8
2.5
3.1
-4.3
13.4
0.1
9.7
11.4
10.3
29.3
24.0
23.2
23.0
21.5
18.3
13.4
13.6
13.9
10.9
21.2
16.0
11.6
25.4
21.3
6,755.2
0.1
0.8
14.4
5.8
9.4
47.8
28.4
17.9
13.0
15.2
11.2
-1.8
4.2
-7.3
2.7
19.3
12.0
14.6
1.9
8.3
38.1
31.1
23.4
20.6
19.1
20.4
16.1
9.4
6.9
8.3
17.1
18.4
7.8
3.3
5.6
8,060.7
-1.5
-3.2
12.2
5.5
14.2
19.6
3.7
13.3
21.8
--
15.3
95.9
1.9
11.8
21.7
11.9
16.6
108.5
2.4
8.3
20.6
13.4
17.0
91.3
3.4
12.1
20.5
12.3
14.9
109.7
4.0
10.1
16.9
9.1
15.7
--
0.8
1.8
11.4
6.9
12.8
Indices
Crisil Balanced Fund Index
Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhan
first understand the individuals investment objectives and risk-taking capacity, and then recommend a suitable portfolio. So, we suggest
that you get in touch with our Mutual Fund Advisor before investing in the best funds.
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.
37
December 2015
MF PICKS
MUTUAL FUNDS
SHAREKHANS TOP SIP FUND PICKS
DESK
NOVEMBER 13, 2015

Data as on November 03, 2015
Investment period
Total amount invested (Rs)
Funds would have grown to (Rs)
NAV
1 year
12,000
Present
Avg. annual
value (Rs)
return (%)
Present
value (Rs)
3 years
36,000
Avg. annual
return (%)
5 years
60,000
Present Avg. annual
value (Rs)
return (%)
Large-cap funds
SBI Bluechip Fund
28.4
12,128.3
1.17
49,599.2
11.6
98,288.6
10.6
Reliance Top 200 Fund
23.7
11,792.6
-1.88
48,839.0
11.0
94,472.1
9.7
Birla Sun Life Top 100 Fund
42.8
11,892.6
-0.97
48,050.7
10.4
94,397.1
9.6
172.4
11,980.5
-0.18
47,086.1
9.6
88,928.7
8.3
48.2
11,733.2
-2.42
46,137.5
8.9
87,337.7
7.9
26,590.6
11,395.0
-5.42
41,026.7
4.6
76,542.6
5.1
Birla Sun Life Pure Value Fund
38.7
12,127.5
1.2
57,868.1
17.7
115,444.8
14.2
L&T India Value Fund
25.1
12,427.9
3.9
57,252.2
17.2
114,320.8
14.0
Franklin India High Growth Companies Fund
29.2
11,852.0
-1.3
55,065.5
15.7
112,544.7
13.6
Kotak 50 - Reg
UTI Top 100 Fund
BSE Sensex
Multi-cap funds
ICICI Prudential Value Discovery Fund
114.1
11,992.8
-0.1
55,086.8
15.7
112,326.3
13.6
SBI Magnum Global Fund 94
134.2
12,162.2
1.5
55,025.4
15.7
112,426.2
13.6
10,675.9
11,555.2
-4.0
43,269.8
6.5
80,158.4
6.0
BSE 500
Mid-cap funds
SBI Small & Midcap Fund
32.4
12,883.9
8.1
67,259.1
23.9
137,082.0
18.3
Mirae Asset Emerging Bluechip Fund
31.0
12,530.8
4.8
61,052.8
19.8
127,757.3
16.6
UTI Mid Cap Fund
79.9
12,120.7
1.1
60,720.6
19.6
123,320.0
15.8
SBI Magnum Midcap Fund
59.7
12,412.3
3.7
59,770.1
19.0
124,835.0
16.1
Tata Mid Cap Growth Fund
102.9
12,156.4
1.4
58,954.6
18.4
117,725.0
14.7
11,013.5
12,146.7
1.3
49,868.5
11.8
90,359.2
8.7
Axis Long Term Equity Fund
30.8
12,103.2
0.9
55,078.3
15.7
114,026.0
13.9
Birla Sun Life Tax Relief 96
21.4
12,048.0
0.4
52,291.7
13.6
101,711.9
11.3
424.5
12,056.0
0.5
51,062.3
12.7
99,746.2
10.9
29.3
11,870.9
-1.2
50,078.3
12.0
99,987.9
10.9
271.2
12,036.3
0.3
49,711.4
11.7
97,484.6
10.4
8,060.7
11,390.6
-5.5
41,302.3
4.8
76,942.7
5.2
BSE Mid-cap
Tax saving funds
Franklin India Taxshield

BNP Paribas Long Term Equity Fund
ICICI Prudential Long Term Equity Fund
(Tax Saving) - Reg
CNX Nifty
Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhan
first understand the individuals investment objectives and risk-taking capacity, and then recommend a suitable portfolio. So, we suggest
that you get in touch with our Mutual Fund Advisor before investing in the best funds.
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.
December 2015
38
EQUITY
EARNINGS GUIDE
FUNDAMENTALS
Sharekhan Earnings Guide

Company
CMP
(Rs)
Prices as on December 03, 2015

Sales
FY15
Net profit
FY16E
FY17E
FY15
FY16E
FY17E
EPS
(%) EPS
growth
FY15
FY16E
FY17E FY17/FY15
PE (x)
RoCE (%)
RoNW (%)
DPS
FY15 FY16E FY17E FY16E FY17E FY16E
FY17E
Div
yield
(Rs) (%)
AUTOMOBILES
Apollo Tyres
158.5
12,785.2
11,802.7
13,063.3
1,060.1
1,092.9
1,134.6
20.8
21.5
22.3
3%
7.6
7.4
7.1
21.2
16.9
19.8
17.4
2.0
1.3
92.0
13,562.2
18,698.1
23,084.2
233.9
996.3
1,559.4
0.8
3.5
5.5
158%
111.9
26.3
16.8
21.2
29.2
18.0
23.6
0.5
0.5
2,480.2
21,612.0
23,784.6
27,220.7
3,087.1
3,774.8
4,396.2
106.7
130.4
151.9
19%
23.2
19.0
16.3
46.1
46.5
32.7
32.9
50.0
2.0
89.5
1,444.1
1,489.6
1,745.5
60.6
78.7
104.6
4.2
5.5
7.3
31%
21.2
16.3
12.3
26.7
30.4
22.2
24.7
1.1
1.2
Hero MotoCorp
2,617.8
27,585.3
28,820.2
33,854.1
2,540.7
3,189.4
3,920.5
127.2
159.7
196.3
24%
20.6
16.4
13.3
62.8
63.8
45.0
45.9
60.0
2.3
M&M
1,345.7
37,468.3
40,680.6
48,139.3
3,087.6
3,644.4
4,727.1
52.2
61.6
79.9
24%
25.8
21.8
16.8
16.8
20.3
17.2
19.5
12.0
0.9
Maruti Suzuki
4,627.1
49,970.6
58,232.6
69,966.8
3,711.2
5,392.1
6,844.9
122.9
178.5
226.6
36%
37.7
25.9
20.4
22.2
22.2
18.0
18.0
25.0
0.5
Ashok Leyland
Bajaj Auto
Gabriel Industries
Rico Auto Industries
45.3
1,346.3
1,076.1
1,234.9
-6.9
33.1
59.4
-0.5
2.4
4.4
-88.7
18.5
10.3
10.4
15.2
7.1
11.6
3.0
6.6
283.5
9,920.1
11,528.5
13,731.5
401.8
496.0
696.1
8.5
10.4
14.7
32%
33.5
27.2
19.3
24.1
30.2
27.4
31.9
1.9
0.7
Allahabad Bank
74.8
8,173.9
8,649.8
9,692.6
620.9
866.5
1,261.3
10.9
15.2
22.1
43%
6.9
4.9
3.4
6.7
9.1
1.6
2.2
Andhra Bank
67.6
6,037.5
6,677.9
7,660.9
638.4
1,050.5
1,261.1
10.6
17.4
20.9
41%
6.4
3.9
3.2
10.0
11.1
2.0
3.0
462.5
22,589.2
26,402.1
31,221.0
7,355.9
8,612.3 10,424.2
31.0
36.3
44.0
19%
14.9
12.7
10.5
17.9
18.6
5.5
1.2
Bajaj Finance
5,540.0
2,871.7
3,705.9
4,698.1
893.6
1,505.1
178.7
220.3
282.5
26%
31.0
25.1
19.6
19.5
19.2
18.1
0.3
Bajaj Finserv
TVS Motor
BANKS & FINANCE
Axis (UTI) Bank
1,173.6
2,026.6
7,587.0
1,689.8
106.2
Bank of Baroda
171.3
17,589.2
18,291.2
20,895.5
3,398.4
3,382.6
4,557.0
15.3
15.3
20.5
Bank of India
125.3
15,576.7
16,884.6
19,188.1
1,708.9
1,640.0
2,106.4
25.7
24.6
31.6
11%
4.9
Capital First
382.2
501.4
695.5
865.8
110.7
171.4
239.5
12.2
18.8
26.3
47%
31.4
Corp Bank
42.4
5,552.8
6,204.3
7,092.3
584.0
685.2
995.5
7.0
8.2
11.9
31%
6.1
5.2
Federal Bank
16%
19.1
0.0
0.0
0.0
0.0
1.8
0.1
11.2
11.2
8.3
8.2
10.3
3.2
1.9
5.1
4.0
5.1
6.3
5.1
4.1
20.3
14.5
10.5
13.3
2.2
0.6
3.6
6.4
8.7
1.4
3.3
1.9
57.1
3,258.7
3,545.8
4,153.2
1,004.9
940.2
1,182.6
5.9
5.5
6.9
8%
9.7
10.4
8.3
11.6
13.2
1.1
HDFC
1,200.2
7,630.7
9,263.1
11,220.9
5,990.1
7,164.2
8,521.1
38.0
45.5
54.1
19%
31.6
26.4
22.2
20.4
21.2
13.0
1.1
HDFC Bank
1,076.8
31,392.0
37,450.7
45,076.5 10,215.9
12,467.9 15,358.2
40.8
49.7
61.3
23%
26.4
21.6
17.6
18.7
19.8
8.0
0.7
ICICI Bank
265.8
31,215.7
35,218.7
40,280.5 11,175.4
12,725.0 14,794.4
19.3
21.9
25.5
15%
13.8
12.1
10.4
15.1
15.9
5.0
1.9
IDBI Bank
93.2
9,755.5
9,552.3
10,757.3
873.4
948.2
1,310.5
5.4
5.9
8.2
22%
17.1
15.8
11.4
3.8
5.1
0.7
0.8
467.9
2,236.4
2,822.4
3,410.2
1,386.2
1,732.4
2,120.0
27.5
34.3
42.0
24%
17.0
13.6
11.1
20.4
21.2
5.0
1.1
LIC Housing Fin.

PTC India Fin. Ser.
40.3
340.7
444.6
576.9
160.9
277.6
372.5
4.4
7.1
9.5
47%
9.2
5.7
4.3
18.1
21.3
1.0
2.5
PNB
136.4
22,446.3
24,459.4
28,244.3
3,061.6
4,110.4
5,168.4
16.5
22.2
27.9
30%
8.3
6.2
4.9
10.1
11.6
3.3
2.4
SBI
241.1
77,591.1
85,970.2
99,619.3 13,101.6
17,862.2 23,772.7
17.5
23.9
31.8
35%
13.7
10.1
7.6
13.2
15.7
3.5
1.5
Union Bank of India
168.8
11,966.9
12,770.0
14,604.2
1,781.6
2,198.3
2,735.1
28.0
34.6
43.0
24%
6.0
4.9
3.9
10.7
12.2
6.0
3.6
Yes Bank
752.1
5,534.3
6,843.2
8,494.8
2,005.4
2,370.0
2,974.9
48.7
57.6
72.3
22%
15.4
13.1
10.4
18.8
20.2
9.1
1.2
Britannia
2,931.9
7,858.4
8,836.0
10,312.3
542.5
853.2
1,036.2
45.2
71.1
86.4
38%
64.9
41.2
33.9
51.9
45.6
55.9
47.5
16.0
0.5
GSK Consumers*
5,960.0
4,136.4
4,327.4
5,046.7
583.6
673.8
800.8
138.8
160.2
190.4
17%
42.9
37.2
31.3
44.2
44.2
29.2
29.2
55.0
0.9
Godrej Consumer
1,221.9
8,242.2
9,292.9
11,044.8
923.8
1,140.7
1,403.0
27.1
33.5
41.2
23%
45.1
36.5
29.7
22.5
24.6
25.7
25.8
5.5
0.5
1.8
CONSUMER GOODS
Hindustan Unilever
816.6
31,199.7
33,912.4
38,564.1
3,886.5
4,389.7
5,379.5
18.0
20.3
24.9
18%
45.4
40.2
32.8
143.1
147.2
101.7
104.4
15.0
ITC
343.4
36,507.4
39,066.0
44,378.7
9,607.7
10,220.6
11,653.0
12.0
12.8
14.5
10%
28.6
26.8
23.7
39.0
38.0
30.9
30.4
6.3
1.8
Jyothy Laboratories
313.5
1,514.8
1,724.2
2,016.2
123.1
185.3
196.9
6.7
10.0
10.7
26%
46.8
31.4
29.3
15.8
21.4
22.4
20.7
4.0
1.3
Marico^
425.2
5,733.0
6,190.7
7,022.9
573.5
711.3
857.2
8.9
11.0
13.3
22%
47.8
38.7
32.0
42.4
41.0
33.5
30.9
2.5
0.6
Zydus Wellness
831.0
415.2
432.3
497.6
98.7
108.4
129.0
25.3
27.7
33.0
14%
32.8
30.0
25.2
24.3
24.1
26.2
26.1
6.0
0.7
0.0
IT / IT SERVICES
Firstsource Solution
42.6
3,034.6
3,260.5
3,568.2
234.3
273.6
336.1
3.5
4.1
5.0
20%
12.2
10.4
8.5
11.8
12.9
12.3
13.3
0.0
HCL Technologies**
851.2
37,062.0
41,931.9
46,415.3
7,255.0
7,612.9
8,746.0
51.4
54.0
62.0
10%
16.6
15.8
13.7
37.5
36.0
31.1
29.3
22.0
2.6
1,057.8
53,319.0
60,873.1
68,084.5 12,330.0
13,082.3 14,889.8
53.9
57.2
65.1
10%
19.6
18.5
16.2
34.0
34.8
24.4
25.0
59.5
5.6
Infosys
Persistent Systems
660.0
1,891.3
2,207.0
TCS^^
2,350.8
94,648.4
108,999.5
2,524.4
290.6
Wipro
572.6
46,954.5
50,707.4
55,105.1
8,652.8
BHEL
168.7
29,542.0
27,106.0
32,886.0
1,419.9
721.0
1,945.0
5.8
CESC
555.0
6,189.0
6,628.3
7,149.0
698.0
704.3
765.2
52.4
Crompton Greaves
193.8
14,013.0
14,248.0
15,628.0
183.0
134.0
365.0
2.1
Finolex Cable
250.0
2,449.1
2,736.9
3,162.8
175.8
191.9
243.3
11.5
Greaves Cotton^
149.3
1,692.2
1,668.6
1,800.3
127.7
187.6
210.4
5.2
Kalpataru Power
275.0
4,422.3
4,696.0
5,371.0
165.6
194.0
236.0
10.8
65.1
13,081.7
13,561.0
14,080.0
189.3
207.0
216.0
6.4
7.0
7.3
7%
10.2
9.3
8.9
11.4
11.4
163.6
1,312.8
1,601.7
1,935.0
61.4
88.9
124.0
6.0
8.7
12.1
42%
27.3
18.9
13.5
28.0
28.0
122,620.7 19,648.4
358.5
36.3
36.5
44.8
11%
18.2
18.1
14.7
26.3
27.6
19.2
20.3
10.0
1.5
24,032.0 26,817.8
291.8
100.3
122.7
136.9
17%
23.4
19.2
17.2
41.9
38.0
32.7
29.7
32.0
1.4
9,305.0 10,498.9
35.3
37.8
42.6
10%
16.2
15.1
13.4
17.6
17.9
20.2
20.0
12.0
2.1
2.9
7.9
17%
29.1
58.2
21.3
3.1
8.2
2.1
5.5
1.2
0.7
52.9
57.4
5%
10.6
10.5
9.7
7.2
7.3
8.4
8.6
9.0
1.6
2.1
5.8
66%
92.3
92.3
33.4
8.0
11.2
3.0
8.7
1.2
0.6
12.5
15.9
18%
21.7
20.0
15.7
18.9
21.3
19.3
21.7
1.8
0.7
7.7
8.6
28%
28.5
19.4
17.3
28.9
29.0
21.5
21.5
1.1
0.7
12.6
15.4
19%
25.5
21.8
17.9
14.4
15.3
9.0
10.1
1.5
0.5
7.5
7.4
2.2
3.4
25.2
26.8
1.5
0.9
CAPITAL GOODS / POWER
PTC India
Skipper
Note: For Grasim and Apollo Tyres we have shifted our estimates to consolidated
^^ FY2015 earnings numbers are on reported basis, including the one-time impact of bonus for employees to the tune of Rs2,627.9 crore.
39
December 2015
EQUITY
FUNDAMENTALS
EARNINGS GUIDE
Company
CMP
(Rs)
Sales
Thermax
855.7
Triveni Turbine
108.5
650.8
889.5
1,079.8
93.3
129.2
160.7
2.8
3.9
4.9
32%
38.8
27.8
22.1
62.4
51.1
44.1
36.7
1.0
0.9
Va Tech Wabag
701.3
2,435.2
2,869.0
3,448.0
110.1
137.2
181.1
20.3
25.3
33.4
28%
34.5
27.7
21.0
21.2
24.3
14.4
16.8
4.0
0.6
V-Guard Industries
913.5
1,745.9
1,938.0
2,221.0
70.7
96.0
121.0
23.6
32.0
40.2
31%
38.7
28.5
22.7
32.6
34.4
23.2
24.2
4.5
0.5
736.8
1,601.1
1,965.9
2,527.9
25.0
55.9
106.5
8.3
15.8
30.0
91%
89.1
46.7
24.5
9.2
11.8
7.5
12.3
2.0
0.3
87.1
6,320.7
7,456.3
8,599.1
308.8
205.8
512.1
12.5
6.3
15.6
12%
7.0
13.9
5.6
8.2
9.4
3.4
7.7
4.0
4.6
1.6
FY15
4,697.4
FY16E
4,578.0
Net profit
FY17E
5,072.0
FY15
335.7
FY16E
339.0
FY17E
393.0
FY15
28.2
EPS
(%) EPS
growth
FY16E
28.5
FY17E FY17/FY15
32.9
8%
PE (x)
RoCE (%)
RoNW (%)
FY15 FY16E FY17E FY16E FY17E FY16E

30.4 30.0 26.0 21.2 22.1 14.3
DPS
FY17E
14.9
Div
yield
(Rs) (%)
7.0 0.8
INFRASTRUCTURE / REAL ESTATE

Gayatri Projects
ITNL
IRB Infra
247.1
3,847.5
4,486.4
5,035.6
542.9
628.3
865.8
15.4
17.9
24.6
26%
16.0
13.8
10.0
11.1
13.5
13.7
16.7
4.0
Jaiprakash Asso
12.9
10,854.3
13,905.8
15,220.7
-867.3
-93.2
115.2
-4.1
-0.4
0.5
-3.2
-29.4
23.8
6.6
7.3
-0.7
0.9
0.0
0.0
Larsen & Toubro
1,347.9
57,017.4
62,265.9
71,453.9
4,699.0
4,320.5
5,254.3
50.7
46.5
56.5
6%
26.6
29.0
23.8
12.5
14.2
11.2
12.5
16.3
1.2
27.3
7,090.3
8,316.6
9,381.7 -1,681.4
-356.0
-268.0
-50.6
-10.7
-8.1
0%
-0.5
-2.5
-3.4
-1.7
2.3
-48.8
-58.3
0.0
0.0
Oil India Ltd
386.5
9,748.2
9,754.0
2,584.0
2,857.0
41.8
43.0
47.5
7%
9.3
9.0
8.1
13.1
13.8
11.7
12.2
20.0
5.2
Reliance Ind
977.2 375,435.0
354,461.0
23,011.0 27,459.0
80.1
78.2
93.3
8%
12.2
12.5
10.5
7.7
8.8
9.7
10.5
10.0
1.0
Selan Exploration
242.1
79.3
17.3
16.0
23.8
17%
14.0
15.1
10.2
11.2
15.3
9.1
12.6
5.0
2.1
Aurobindo Pharma
820.8
12,120.5
13,965.1
16,216.4
1,635.4
1,987.0
2,545.8
28.0
34.0
43.6
25%
29.3
24.1
18.8
28.7
31.9
32.5
30.7
3.4
0.4
Cipla
651.2
11,345.4
13,627.0
16,673.0
1,180.8
1,793.0
2,563.0
14.7
22.3
31.9
47%
44.3
29.2
20.4
17.7
21.9
15.2
18.4
2.0
0.3
0.6
Punj Lloyd
OIL & GAS
74.2
10,988.0
2,510.2
404,645.9 23,566.0
110.9
28.3
26.3
39.1
PHARMACEUTICALS
Cadila Healthcare
Divi's Labs
Glenmark Pharma
Ipca Laboratories
Lupin
Sun Pharma
Torrent Pharma
403.6
8,651.3
10,663.1
12,672.4
1,150.6
1,569.0
2,207.3
11.3
15.3
21.6
38%
35.7
26.4
18.7
27.3
30.3
27.5
28.3
2.4
1,126.7
3,114.9
3,732.8
4,580.9
865.5
1,040.2
1,350.3
32.6
39.2
40.9
12%
34.6
28.7
27.5
32.2
33.5
26.1
27.0
10.0
0.9
958.0
6,644.8
8,068.0
9,806.0
747.0
935.0
1,353.7
27.5
34.5
49.9
35%
34.8
27.8
19.2
18.9
22.6
24.2
26.3
2.0
0.2
765.0
3,142.0
3,337.0
3,931.0
254.0
330.0
538.0
19.8
26.1
42.7
47%
38.6
29.3
17.9
13.9
20.0
14.1
19.8
1.0
0.1
1,821.7
12,599.7
14,206.0
16,887.0
2,403.0
2,655.0
3,341.0
53.5
59.1
74.3
18%
34.1
30.8
24.5
30.8
31.0
23.1
22.8
7.5
0.4
726.9
27,286.5
28,078.2
32,007.8
4,778.4
5,699.3
8,698.1
23.1
23.7
34.0
21%
31.5
30.7
21.4
21.1
25.1
18.3
22.4
0.0
0.0
1,470.0
4,585.0
6,906.1
6,927.2
751.0
1,507.2
1,224.9
44.4
89.1
72.4
28%
33.1
16.5
20.3
38.5
28.7
45.4
26.1
11.3
0.8
3,744.1
32,433.0
34,757.0
41,000.0
1,753.0
1,860.0
2,259.0
190.9
202.5
246.0
14%
19.6
18.5
15.2
11.7
13.5
7.3
7.8
18.0
0.5
380.0
3,743.0
4,155.0
4,871.0
258.0
370.0
463.0
10.8
15.6
19.4
34%
35.2
24.4
19.6
13.2
14.6
7.7
8.4
1.5
0.4
11,300.0
6,454.0
6,134.0
9,687.0
462.0
390.0
1,220.0
133.1
112.0
350.3
62%
84.9
100.9
32.3
10.0
20.0
12.0
19.0
22.0
0.2
2,859.4
22,656.0
24,839.0
29,933.0
2,062.0
2,217.0
3,147.0
75.3
80.9
114.9
24%
38.0
35.3
24.9
12.9
16.8
10.6
13.2
9.0
0.3
BUILDING MATERIALS
Grasim
The Ramco Cements
Shree Cement**
UltraTech Cement
DISCRETIONARY CONSUMPTION
Cox and Kings
245.9
2,569.1
2,456.2
2,798.7
399.8
352.4
477.0
23.6
20.8
28.2
9%
10.4
11.8
8.7
11.3
13.5
15.5
18.3
1.0
0.4
Century Plyboards (I)
190.6
1,588.0
1,768.0
2,088.0
149.0
180.0
224.0
6.7
8.1
10.1
23%
28.4
23.5
18.9
23.4
23.2
38.1
33.3
2.0
1.0
Inox Leisure
245.3
1016.8*
1,373.9
1,651.0
20*
72.6
102.1
2.2
7.9
11.1
125%
111.5
31.1
22.1
12.9
15.6
9.7
12.0
0.0
0.0
KDDL
331.2
411.7
472.8
574.1
8.7
10.5
12.8
9.5
11.5
14.1
22%
34.9
28.8
23.5
13.3
13.4
16.5
16.4
2.0
0.6
KKCL
1.1
1,975.0
405.1
453.2
526.6
66.3
73.8
101.3
53.7
59.8
82.1
24%
36.8
33.0
24.1
29.3
31.5
21.5
26.0
22.0
Orbit Exports
373.0
158.0
175.0
209.0
27.9
30.8
31.0
19.4
22.8
27.6
19%
19.2
16.4
13.5
20.9
21.9
30.5
29.4
4.5
1.2
Raymond
417.3
5,352.0
5,850.0
6,497.0
115.8
88.3
124.3
18.9
14.4
20.2
3%
22.1
29.0
20.7
10.0
11.2
5.5
7.3
3.0
0.7
Relaxo Footwear
486.1
1,472.8
1,765.4
2,153.5
103.1
133.3
179.9
8.6
11.1
15.0
32%
56.5
43.8
32.4
26.0
27.7
22.1
22.3
0.5
0.1
Speciality Rest.
118.0
299.4
341.6
430.7
9.5
10.9
28.6
2.0
2.3
6.1
75%
59.0
51.3
19.3
4.8
12.0
3.5
8.9
1.0
0.8
Thomas Cook India
204.2
3244.3#
3,850.8
4,596.1
112.3
151.0
325.4
2.8
3.6
7.8
67%
72.9
56.7
26.2
20.4
21.8
23.4
25.6
0.5
0.2
Wonderla Holidays
365.6
181.9
212.9
312.5
50.6
56.1
74.1
9.0
9.9
13.1
21%
40.6
36.9
27.9
22.0
27.4
15.6
19.3
1.5
0.4
Zee Entertainment
409.9
4,883.7
5,727.5
6,767.1
977.5
1,075.2
1,353.9
8.6
9.9
12.4
20%
47.7
41.4
33.1
23.6
26.4
18.8
20.6
2.6
0.6
0.3
DIVERSIFIED / MISCELLANEOUS
Aditya Birla Nuvo
2,101.5
10,260.1
11,425.6
584.2
639.3
44.9
49.2
-100%
46.8
42.7
0.0
8.9
7.1
7.0
Bajaj Holdings
1,725.0
523.9
2,028.7
182.3
9.5
0.0
0.0
32.5
1.9
319.6
92,039.0
97,293.0
107,143.0
5,883.0
5,211.0
6,712.0
14.7
13.0
16.8
7%
21.7
24.6
19.0
12.3
14.2
5.4
10.2
3.9
1.2
Bharti Airtel
Bharat Electronics
1,223.4
6,775.9
7,742.9
9,312.0
1,100.6
1,324.3
1,598.8
45.9
55.2
66.6
21%
26.7
22.2
18.4
16.4
17.5
12.5
13.3
9.2
0.7
Gateway Distriparks
327.8
1,105.0
1,070.0
1,175.0
187.8
153.0
187.0
17.3
14.1
17.2
0%
19.0
23.2
19.1
14.5
17.2
16.7
20.1
7.0
2.1
Info Edge (India)
859.7
611.6
716.5
833.6
164.7
140.0
203.1
13.7
11.6
16.8
11%
62.7
74.1
51.2
11.1
14.9
7.8
10.3
3.0
0.3
Max India
539.4
14,815.0
279.6
10.5
51.4
5.0
0.9
Ratnamani Metals
566.7
1,675.6
1,685.0
1,933.0
172.5
162.9
206.7
37.0
34.9
44.3
9%
15.3
16.2
12.8
23.3
25.7
16.7
18.2
5.5
1.0
Supreme Industries**
662.4
4,255.2
4,641.7
5,597.5
311.7
348.7
444.2
24.5
27.5
35.0
19%
27.0
24.1
18.9
28.6
32.0
24.2
25.7
9.0
1.4
UPL
421.4
12,090.5
13,198.5
15,000.7
1,224.0
1,220.7
1,534.3
28.6
28.5
35.8
12%
14.7
14.8
11.8
15.9
17.6
18.3
19.2
5.0
1.2
^Marico estimates excluding Kayas financials

** June year ended
Crompton Greaves is in the process of selling its overseas power system business by Q4FY2016. Hence, we have not estimated the FY2017 numbers
Divis Labs post 1:1 bonus
BEL post Bonus: 2: 1
40
* Inox Leisure FY2015 includes consolidation of Satyam Cineplexes, which will affect the overall profitability
#We have annualised these ratios to make them comparable
Cadila Healthcare post stock split from Rs 5 to Rs 1
December 2015
EQUITY
EARNINGS GUIDE
FUNDAMENTALS
Remarks
Automobiles
Apollo Tyres
Apollo Tyres is the market leader in truck and bus tyre segments with a 28% market share. The management is
expecting strong demand traction in the European operations (particularly the summer tyre segment) and is
gaining market share in Europe. Further, the domestic operations would see a pick-up in demand since H2FY15.
The margins may sustain at higher levels due to subdued raw material prices. The company will be investing
$560mn over the next three years to set up a greenfield facility in Hungary and Rs4,000 crore to expand capacity
at Chennai facility. We maintain our Buy recommendation on the stock with a price target of Rs201.
Ashok Leyland
Ashok Leyland, the second largest CV manufacturer in India, is a pure CV play. The MHCV volumes which have
been under pressure over the past two years have witnessed a sustained recovery and been growing in double
digits over the past few quarters. We expect MHCV volumes to remain buoyant over FY16-17 driven by a pickup in the economic cycle, improved operator profitability and phase-wise implementation of Bharat Stage IV
norms across the country leading to pre-buying. The company has managed to take price hikes which along with
the higher operating leverage has propped up the margins. We have a Buy recommendation on the stock with a
price target of Rs105.
Bajaj Auto
Bajaj Autos domestic motorcycle volumes have been under pressure over the last couple of years largely due to
issues in the executive segment and a drop in its market share to an all-time low of 15.2% in Q4FY2015 from
24.5% in FY2013. However, the launch of CT100 and refreshed Platina has given a much needed volume push
while the newly launched Pulsar variants would help consolidate its leadership in the premium motorcycle segment.
After a blip in Q4FY15, exports are getting back on track and are expected to see a strong growth going ahead.
The launch of its quadricycle, RE60, has been delayed by legal issues and the matter is expected to be sorted soon.
The company maintains industry leading EBITDA margins and the rupees depreciation is expected to boost its
profitability as exports contribute 45% of the total revenues.
Gabriel India
Gabriel is one of Indias leading manufacturers of shock absorbers and front forks with a diversified customer
base. A pick-up in the volumes post-election in the PV and CV segments as well as higher growth in the twowheeler segment, increase in market share with HMSI and continued growth in the aftermarket sales are expected
to drive the revenue growth going forward. Moreover, with increasing utilisation levels and higher proportion of
revenues from the profitable CV segment, the OPM is expected to expand from 6.6% in FY13 to 7.9% in FY16.
Further, a reduction in debt level would lead to higher return ratios, going forward. Therefore, we recommend a
Buy with a price target of Rs105.
Hero MotoCorp
HMCL is the largest two-wheeler manufacturer in the world with sales of over 6.6mn vehicles in FY15 and a
domestic market share of 42%. We expect the two-wheeler industry to grow at 10-12% CAGR over the next five
years driven by increased penetration levels in rural areas and replacement demand. HMCL is expected to maintain
its leadership position in the industry. It has presence in the fast growing scooter segment with two models. It will
launch a couple of new scooters and double the scooter capacity which would boost its volumes. HMCL has
aggressive plans to increase export contribution to 10% (currently 2%) by 2017. Also, with the Leap program,
which is being implemented currently, the management targets an OPM expansion of 200BPS in the next couple
of years through cost rationalisation. We recommend a Buy with a price target of Rs3,250.
M&M
M&M is a leading maker of tractors and UVs in India. We expect demand for the automobile segment to pick up
with an improvement in customer sentiment. Additionally, new launches especially in the compact UV space will
drive volume growth. After growing in strong double digits, the tractor demand was under pressure in FY15-16
due to weak monsoon rainfall. However, with the expectation of normal rainfall we expect the tractor segment to
recover and report a strong growth in FY17. We remain positive on the stock, given its leadership position in the
domestic tractor and UV segments as well as the value derived from its subsidiaries across business segments.
Maruti Suzuki
Rico Auto Inds.
Maruti Suzuki is Indias largest passenger vehicle maker with a strong 45% market share. It has been able to gain
market share over the last two years on the back of a diverse product portfolio, a large distribution network with
an increased focus on rural markets and a shift in consumer preference to petrol models from diesel. It is poised to
reap the benefits from the increased discretionary spending from the Seventh Pay Commission pay-out. The
recently launched premium hatchback, Baleno, has received a positive response which will help the company
expand market share in the segment. Further, the company has a pipeline of new launches over the next few years,
with the most important being the entry into the compact utility vehicle and light commercial vehicle segments.
The management plans to double its existing sales and distribution network in order to achieve its target of
doubling domestic volumes over the next five years. The profitability remains high due to soft commodity prices,
depreciation of the yen and high operating leverage. We remain positive on the stock with a price target of
Rs4,950.
Rico is one of the largest producers of high-pressure non-ferrous die castings for the auto sector. It has recently
divested its 50% stake in a joint venture with FCC Co., Japan for Rs495 crore. The significant cash flow (nearly
equivalent to current market cap) is expected to be a game changer for the company and enable it to deleverage its
balance sheet and fund future capex. Additionally, a lower interest burden will result in an exponential growth in
the earnings and free cash flow. The company will be commissioning three new plants in the next 12 months and
is poised to benefit from an auto demand revival. We have a Buy recommendation on the stock with a price target
of Rs58.
41
December 2015
EQUITY
FUNDAMENTALS
EARNINGS GUIDE
Remarks
TVS Motor
Allahabad Bank
Andhra Bank
Andhra Bank, with a wide network of over 2,200 branches across the country, has a strong presence in south
India especially in Andhra Pradesh. Though it is trading at an attractive valuation, but the concerns on asset
quality front and the political situation within the state could affect its operations. Valuation factors the same.
Axis Bank
Axis Bank is the third largest private sectors bank, continues to grow faster than the industry and is diversifying its
book in favour of the retail segment. The banks liability profile has improved significantly which would help to
sustain the margins at healthy levels. We expect the earnings growth to remain reasonably strong driven by a
healthy operating performance while asset quality pressures will be manageable.
Bajaj Finance
Bajaj Finance, owned by Bajaj Finserv, is one of the most diversified and leading NBFCs in the country. It has
assets spread across products, viz loans for consumer durables, two- and three-wheelers, loans to small and medium
enterprises (SMEs), mortgage loans and commercial loans. Despite a strong growth in loans, the asset quality and
provisioning remain among the best in the system. Given the strong growth rate, high margins and return ratios,
it deserves to trade at a premium to the other NBFCs
Bajaj Finserv
Bajaj Finserv is a financial conglomerate having presence in financing business (vehicle finance, consumer finance
and distribution) and is among the top players in the life insurance and general insurance segments. Its consumer
finance (Bajaj Finance) and general insurance businesses continue to report a robust performance while the life
insurance business is showing signs of a pick-up after being affected by a change in regulations.
Bank of Baroda
Bank of Baroda is among the top public sector banks (PSBs) having a sizeable overseas presence (over 100 offices
in 24 countries) and a strong network of over 5,200 branches across the country. It has a stronghold in western
and eastern India. Its performance metrics remain superior to that of the other PSBs, though the asset quality
trends will be the key monitorable in the near term.
Bank of India
Bank of India has a network of over 4,900 branches, spread across the country and abroad, along with a diversified
product and services portfolio, and steadily growing assets. The operating performance has weakened due to
margin deterioration and sharp rise in NPAs. Given the rise in the number of incremental stressed loans and the
relatively weaker capital position, its valuations may remain subdued.
Capital First
Capital First (erstwhile Future Capital Holdings) has been acquired by global private equity firm, Warburg Pincus
(a 72% stake). The present management has taken several initiatives to tap the high-growth retail product segments,
like gold loans, loan against property and loan against shares. It has a strong CAR and sound asset quality. Its
loan book is expected to sustain a 25-30% growth in the next three years. As a result of several initiatives taken,
the operating leverage will play out and may lead to significant pick-up in profitability over medium term.
Corp Bank
Corporation Bank is a mid-sized PSB having a relatively higher presence in south India. It is predominantly
exposed to the corporate segment, which constitutes about 45% of its book. Due to a higher dependence on the
wholesale business and a low CASA ratio, it lags its peers in terms of operational performance. Also, the rise in
NPAs could keep provisioning high and weaken earnings performance.
Federal Bank
Federal Bank is among the better performing old private sector banks in India with a strong presence in south
India, especially Kerala. Under the new management, the bank has taken several initiatives, which would improve
the quality of its earnings and asset book. The asset quality has consistently improved in the past several quarters
and the operating performance is picking up gradually. The valuations remain attractive over the medium to long term.
HDFC
HDFC is among the top mortgage lenders providing housing loans to individuals, corporates and developers. It
has interests in banking, asset management and insurance through its key subsidiaries. As these subsidiaries are
growing faster than HDFC, the value contributed by them would be significantly higher going forward. Due to a
dominant market share and consistent return ratios, it should continue to command a premium over the other
NBFCs. Any unlocking of value from its insurance business will be positive for the stock.
HDFC Bank
ICICI Bank
HDFC Bank is among the top performing banks in the country having deep roots in the retail segments. Despite
the general slowdown in the credit growth, the bank continues to report a strong growth in advances from retail
products. Its relatively high margins (compared with its peers), strong branch network and better asset quality
make HDFC Bank a safe bet and there is scope for expansion in the valuations.
ICICI Bank is Indias largest private sector bank with a network of over 4,000 branches in India and a presence in
around 18 countries. The bank has once again entered an expansionary mode after making a conscious effort to
TVS Motor is the fourth largest two-wheeler manufacturer in the country with a strong presence in the scooter
segment. The scooter segment has grown at a CAGR of 25% over the past five years as opposed to 12% CAGR in
motorcycles and currently contributes 30% of the total two-wheeler volumes. With the launch of the Jupiter in
October 2013, the company has balanced its scooter portfolio and witnessed incremental volumes. Additionally,
new launches such as Star City+, refreshed Wego and new Scooty Zest have helped maintain the growth momentum.
The company will launch two new motorcycles in H2FY15. Exports, especially of three-wheelers, are doing
extremely well. We expect a margin expansion of 40-50BPS over FY14-16.
Banks & Finance
With a wide network of over 3,100 branches spread across India, Allahabad Bank enjoys a stronghold in north and east
India. But it has reported a rise in slippages resulting in deterioration of its asset quality. Relatively higher proportion of
stressed assets and low tier-I CAR remain concerns, though the low valuation partly factors the same.
42
December 2015
EQUITY
EARNINGS GUIDE
FUNDAMENTALS
Remarks
contract its advances book due to asset quality concerns. The operating profit improved significantly and is the
key driver of the earnings growth. The bank offers substantial value unlocking opportunities from the insurance
and securities businesses.
IDBI Bank
IDBI Bank is one of leading PSBs of India, though it is largely present in the corporate lending space. It is gradually
working towards improving its liability base and expanding the retail book which is likely to reflect in the form of
better margins and return ratios. However, due to rising asset quality risks, low tier-I CAR and slower business
growth, the stock is likely to underperform in the near term.
LIC Housing
LICHFL is the third largest mortgage financier (including banks) in India with a market share of 11% and loan
book of over Rs1,00,000 crore. It is promoted by Life Insurance Corporation of India, which is among the most
trusted brand in the country. With over 200 branches, 1,241 direct sales agents, 6,535 home loan agents and 782
customer relationship associates, the company has among the strongest distribution structures in India to support
business expansion. Going ahead, a revival in the economy and moderation in the borrowing rates could be the
key triggers for the stock. Therefore, considering stable RoE of ~20%, sound asset quality and healthy growth
outlook, the companys fundamentals are strong.
PNB
Punjab National Bank has one of the best liability mixes in the banking space, with low-cost deposits constituting
around 40% of its total deposits. This helps it to maintain one of the highest margins among PSBs. However, in
view of the weakness in the economy and relatively higher exposure to troubled sectors, the asset quality stress has
increased and NPA issues will persist over next 2-3 quarters.
PFS
PTC India Financial Services, owned by PTC India, is focused on providing financial solutions to projects in the
energy value chain. Given the robust lending opportunities in the renewable energy segment and the likely reforms
in the thermal power segment, the loan growth is expected to remain strong over the next two to three years. The
proceeds from exits in investments would add to the profitability. The asset quality despite some deterioration
remains among the best in the system.
SBI
State Bank of India is the largest bank of India with loan assets of over Rs12 lakh crore. The loan growth for FY15
was in line with the industry average while the core operating performance was relatively strong. The successful
merger of the associate banks and value unlocking from insurance business could provide further upside for the
bank. While the bank is favourably placed in terms of liability base and the operating profit is also improving, the
asset quality would remain a key monitorable in the near term.
Union Bank
Union Bank of India has a strong branch network and an all-India presence. The bank aspires to become the
largest retail bank. Hence, it has ramped up its manpower and infrastructure to ramp up retail, SME lending.
While the high stressed loans and weak capital ratios remain concerns with the bank, the current valuations are at
steep discount to book value which partly factors the concerns.
Yes Bank
Yes Bank, a new generation private bank, started its operations in November 2004 and has emerged as among
the top performing banks. It follows a unique business model based on knowledge banking, which offers product
depth and a sustainable competitive edge over established banking players. The bank is suitably poised to ride
the recovery in the economy and the retail deposit franchise is showing a sharp improvement which will support
the margins.
Britannia
GSK Consumers
GCPL
HUL
ITC
Consumer goods
Britannia is the second largest player in the Indian biscuit market with about 30% market share. Under a new
leadership, Britannia has been able to leverage and monetise its strong brand and position in the biscuit and snack
segments. The company can sustain its higher than industry growth rates with an improving distribution reach, entry
into newer categories and focus on cost efficiency. We recommend a Buy on the stock with a price target of Rs3,650.
GSK Consumer Healthcare is a leading player in the MFD segment with a close to 70% share in the domestic market.
Judicious new launches and brand extensions, and the expansion of its distribution reach have helped it to stay ahead
of the competition and maintain its pricing power over the years. In a bid to de-risk its business model, it has expanded
its product portfolio by entering into new categories such as biscuits and oats in the recent years. With cash balance
of more than Rs2,000 crore the company can invest in growth initiatives as well as reward its investors with a healthy
dividend payment. We recommend Buy on the stock.
Godrej Consumer Products is a major player in personal wash, hair colour and household insecticide market
segments in India. The recent acquisitions of Darling Group, Tura, Megasari and Latin American companies have
helped the company to expand its geographic footprint. We believe the decent sales volume growth in the domestic
business coupled with a strong growth in the Indonesian, African and Argentine businesses would help it to
achieve an 18% top line growth and a 26% bottom line growth (CAGR) over FY15-17.
Hindustan Unilever is Indias largest FMCG Company. With declining inflation and improving sentiment, HULs
volume growth in the domestic business is expected to improve in the coming years. Also it would be one of the
key beneficiaries of reducing input prices. Though business fundamentals have improved, the valuation remains at
premium levels. Hence we recommend Hold on the stock. In the long term, it will be one of the key beneficiaries
of the Indian consumerism story.
ITC has a strategy of effectively utilising the excess cash generated from its cash cow, the cigarette business, to
strengthen and enhance its other non-cigarette businesses. This would nurture the growth of these businesses some
of which are at a nascent stage. The fourth consecutive year of a 15%+ hike in excise duty will continue to put
pressure on the cigarette sales volume. However price hikes will maintain the profitability of the cigarette business.
The current valuation makes ITC one of the cheapest stocks in the large-cap FMCG space.
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Jyothy Labs
Jyothy Laboratories is the market leader in the fabric whitener segment in India. With the successful integration of
Henkel and the induction of a new management team led by S Raghunanadan, it is transforming itself from a onebrand wonder to an aggressive FMCG player. We expect its top line to grow at a CAGR of 15%. A stable OPM
and lower interest cost would aid the PAT to grow at 26% CAGR over FY15-17.
Marico
Marico is among Indias leading FMCG companies. Its core brands, Parachute and Saffola, have a strong footing
in the market. It follows a three-pronged strategy which hinges on expansion of its existing brands, launch of new
product categories (especially in the beauty and wellness space) and growth through acquisitions. While the domestic
product portfolio is likely to achieve a steady growth in volumes, the international business is yet to gain momentum.
Marico has been our preferred pick in the FMCG sector and we remain positive on its long-term growth story.
Zydus Wellness
Firstsource
Zydus Wellness is bearing the brunt of a limited product portfolio of three brands (Nutralite, Sugar Free and
Everyuth) that cater to a niche category. The company would benefit from a lower input cost, improving urban
consumer sentiment and a new distribution system in FY17. Thus, we expect a better operating performance from
it in FY17.
IT/IT services
Firstsource Solutions is a specialized BPO service provider. The management has indicated that the worst is over
for earnings downgrades and expects to see an improvement in the earnings starting from Q2FY2016. The health
of its balance sheet is improving gradually as the company is gradually reducing its debt burden through internal
accruals. The management maintains a 6-8% revenue growth guidance for FY16. The growth in actual contract
value (ACV) deals remained muted and grew from $495 million to $501 million sequentially, with net deal wins
of $5-7 million. On the margins front, the management reduced its EBITDA margins guidance level for FY2016 to
70-90BPS from 100-150BPS earlier in FY2015, leading to margin pain in H1FY2016.
HCL Tech
HCL Technologies is a global technology company. Its management indicates that the demand environment looks
promising with an increase in market share coupled with a significant increase in the deal funnel. However, recent
client specific issue and skewed IMS revenues will affect the earnings performance in the near term. Nevertheless,
the management has made investments in digital technologies and Internet of things (IOT), and already won a few
deals in the space. (25% of total deals wins in FY2015 comes from digital space). However, the margins are
expected to remain under pressure in the medium term owing to these investments. We remain positive on the
company in view of its order wins and superior earnings visibility, notwithstanding some near-term softness in the
IMS vertical owing to some projects delays.
Infosys
Infosys is India's premier IT and IT-enabled Services Company that provides business consulting, technology,
engineering and outsourcing services. For FY16, the management has maintained revenue guidance of 10-12% Y-oY growth on a CC basis and increased guidance on a reported basis to 7.2-9.2% from 6-8% earlier, led by lesser impact
of cross-currency headwinds. It has also given a promising aspiration target for 2020 of achieving $20bn in revenues
and 30% in margin. Margins will recover in the next two to three years. For FY16, the management maintained its
margin of 24-25%. Under the leadership of Vishal Sikka, the company is doing the right thing by investing in the digital
space (both organic and inorganic), improving client engagement through design thinking, and automating and
innovating for future growth prospects. We remain positive on the companys growth prospects for the coming years.
Persistent
Persistent Systems has proven expertise and a strong presence in newer technologies, strength to improve its IP
base and the best-in-the-class margin profile which set it apart from the other mid-cap IT companies. Looking at
the strong growth in enterprise revenue, which has delivered a 9% CQGR in the last six quarters, PSLs enterprise
digital transformation strategy is shaping up well. Further, led by the recent acquisitions of Aepona Holdings and
a pick-up in the IP-led revenue in Q4FY2016, we expect the revenue momentum to accelerate in FY17. The
company is also likely to see a gradual improvement in the margins with the tapering off of the SG&A investments
and Aepona Holdings integration.
TCS
Tata Consultancy Services is among the pioneers of the IT services outsourcing business in India and is the largest
IT service firm in the country. Its management aspires to beat the Nasscom growth guidance of 12-14%. Though
the management expects the weakness in the telecom, energy and Diligenta businesses to continue, it expects
clients IT budget to increase modestly in FY16. We remain positive on the company, given its strong positioning,
scale advantage and head start in digital technology.
Wipro
BHEL
Wipro is among the top 5 IT companies in India but in the last few years it has been lagging the industry in terms of
growth. We believe, owing to weakness in the energy and telecom spaces, its unlikely to show material improvement
in earnings on an organic basis in FY16. However, we remain sceptical, as anecdotal evidence on Wipro in the last
two to three years does not inspire confidence.
Capital goods/Power
Bharat Heavy Electricals, Indias biggest power equipment manufacturer, has been the prime beneficiary of the multifold increase in the investments made in the domestic power sector over the last few years. However, the order inflow
has been showing signs of slowing down which would remain a major concern for the company. The key challenge
before the company now would be to maintain a robust order inflow and margin amid rising competition and lower
order inflow. The current order book of around Rs1 lakh crore stands at around 3.4x FY15 sales.
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CESC
CESC is the power distributor in Kolkata and Howrah (backed by 1,225MW of power generation capacity) which
is a strong cash generating business. Further, 600MW of regulated generation capacity (to serve Kolkata distribution)
has come on stream recently in Haldia. However, another 600MW is ready in Chandrapur which is looking for
coal and power purchase linkage. The losses in the retail business are coming down gradually over the past and it
is expected to break even soon. The BPO subsidiary, FirstSource, is performing well in line with expectations. We
retain our Buy recommendation on CESC.
Crompton Greaves Crompton Greaves key businessesindustrial and power systems--are passing through a rough patch and are
potential beneficiaries of the upcoming investment cycle revival. Its consumer product segment is expected to
sustain a high growth and unlock value from a demerger exercise. The troubled international power system
business, which was a major overhang for the stock, is considered for sale. This along with the demerger of the
consumer business could unlock value for shareholders.
Finolex Cables
Finolex Cables, a leading manufacturer of power and communications cables, is set to benefit from an improving
demand environment in its core business of cables. It is leveraging its brand strength to build a high-margin
consumer product business of fans. However, a derivative exposure and the subsequent overhang are matters of
past now, leading to a strong case for a re-rating. We see a healthy earnings growth, return ratios in high teens and
superior cash flow which bode well for the stock. Hence, we remain positive on the stock.
Greaves Cotton
Greaves Cotton is a mid-sized and well-diversified engineering company. Its core competencies are in diesel/petrol
engines, power gensets, agro engines, pump sets (engine segment) and construction equipment (infrastructure
equipment segment). The foray in the mini tractor segment and international markets would open new growth
avenues. The management has taken a strategic call to close and hive off the loss-making divisions. The steps
taken include (1) the closure of the legacy casting unit in Pune; (2) the hive-off of the engineering unit in Germany;
and (3) the closure of operations at the infrastructure division. With the closure of the infrastructure business and
an expected improvement in the engine business, we expect the company to return to its 15%-plus OPM level.
Kalpataru
Kalpataru Power Transmission is a leading EPC player in the transmission & distribution space in India.
Opportunities in this space are likely to grow significantly, thereby providing healthy growth visibility (also current
consol order book is 1.4x its FY14 sales). The OPM of the stand-alone business is likely to remain around 10%;
however the OPM of JMC Projects (a subsidiary) is showing signs of improvement. Listing of Subham Logistics is
also expected to unlock value. We retain our Buy rating.
PTC India
PTC India is a leading power trading company in India with a market share of 35-40% in the short-term trading
market. In the last few years, the company has made substantial investments in areas like power generation
projects and power project financing which will start contributing to its earnings. Long pending receivables was
one of the drags on the companys balance sheet and return ratios; however, the concern has receded after receiving
payment from UPSEB. We retain Buy due to expectations of a healthy volume uptick with an increasing share of
long-term contract business.
Skipper
Skipper is uniquely placed to exploit the growing opportunities in two lucrative segments: power (transmission
tower manufacturing and EPC projects) and water (PVC pipes). It has a comfortable order book of more than
Rs2,000 crore in the transmission business, which looks promising given the huge investments proposal by the
government in the power T&D segment in the next five years. It plans to expand the PVC capacity manifold (4x)
and aspires to turn a national player from a regional player. After the revamp of its low-margin steel tube business
and due to operating leverage the overall margin may improve substantially in the next two years and boost its
earnings and return ratios. The earnings are poised to surge; hence we are positive on the stock.
Thermax
The energy and environment businesses of Thermax are direct beneficiaries of the continuous rise in India Incs
capex. Thermax group order book stands at around 2.4x its FY15 consolidated revenues. However, the company
has shown its ability to maintain a double-digit margin in a tough environment. We retain Hold on the stock due
to its rich valuation.
Triveni Turbines
Triveni Turbines Ltd (TTL) is a market leader in the up to 30MW steam turbine segment. TTL is at an inflexion
point with a strong ramp-up in the after-market segment and overseas business while the domestic market is
showing distinct signs of a pick-up. The company has also formed a JV with GE for steam turbines of 30-100MW
range which is likely to grow multifold in the next 4-5 years. TTL is virtually a debt-free company with a limited
capex requirement and an efficient working capital cycle, reflected in very healthy return ratios. Further, boosted
by the expected uptick in the domestic capex cycle, the companys earnings are likely to grow by 25%+ per annum
over the next 3-4 years.
V Guard Ind
V-Guard Industries is an established brand in the electrical and household goods space, particularly in south
India. Over the years, it has successfully ramped up its operation and network to become a multi-product company.
It has recently also forayed into regions other than the south and is particularly focusing on the tier-II and III cities
where there is a lot of pent-up demand for its products. We expect a CAGR of over 13% in its earnings over FY1517 and RoE of around 22% during this period.
Va Tech Wabag
VA Tech Wabag (VTW) is one of the worlds leading companies in the water treatment field with eight decades of
plant building experience. Given the rising scarcity of fresh water availability, we expect flow of huge investments
in water segment both globally and domestically. With rising urbanisation and industrialisation in India, we
expect substantial investments in this space. Moreover, we expect the water segment to get substantial focus and
budgetary allocation, with the pro-reform BJP-led government at the centre. Given the large opportunity ahead
and inherent strengths of VTW, like professional management, niche technical expertise and global presence, we
expect the earnings to grow by 28% (CAGR) during FY15-17 and generate RoE of around 15%.
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Infrastructure/Real estate
Gayatri Projects is a Hyderabad-based infrastructure company with a very strong presence in irrigation, road and
industrial construction businesses. The order book stands at Rs5,968 crore, which is 3.7x its FY15 revenues. It is
also expanding its power and road BOT portfolio and plans to unlock value by offloading stake to private equity.
The company has potential to transform itself into a bigger entity.
Gayatri Proj
IL&FS Trans
IL&FS Transportation Networks is Indias largest player in the BOT road segment with a pan-India presence and
a diverse project portfolio. The fair mix of annuity and toll projects, and state and NHAI projects along with the
geographical diversification across 12 states reduce the risk to a large extent and provide comfort. Further, a
strong pedigree along with the outsourcing of civil construction activity helps it to scale up its portfolio faster.
Thus, it is well equipped to capitalise on the huge and growing opportunity in the road infrastructure sector.
IRB Infra
IRB Infrastructure Developers is the largest toll road BOT player in India and the second largest BOT operator in
the country with all its projects being toll based. It has an integrated business model with an in-house construction
arm which provides a competitive advantage in bidding for the larger projects and captures the entire value from
the BOT asset. Further, it has a profitable portfolio as majority of its operational projects have become debt-free
and it has presence in high-growth corridors which provides healthy cash flow. Thus, it is well poised to benefit
from the huge opportunity in the road development projects on the back of its proven execution capability and the
scale of its operations.
Jaiprakash Asso
Jaiprakash Associates, Indias leading cement and construction company, is all set to reap the benefits of Indias
infrastructure spending. The company has also monetised very well the real estate properties of Yamuna Expressway.
The marked improvement in the macro environment has improved accessibility to capital and thus eased the
concerns of liquidity to some extent. However, higher leverage could act as drag on the valuation.
L&T
Larsen & Toubro, being the largest engineering and construction company in India, is a direct beneficiary of the
domestic infrastructure capex cycle. The strong potential of its international business, its sound execution track record
and bulging order book, and the strong performance of subsidiaries further reinforce our faith in it. Recent measures
planned by the company to improve its return ratios augur well. Hence, we remain positive on the stock.
Punj Lloyd
Punj Lloyd is the second largest EPC player in the country with a global presence. However, since FY09 the
profitability has come under severe pressure due to cost overruns/liquidated damages in some of Simon Carves (a
subsidiary) projects. Thus, it has put Simon Carves under administration. Further, Libyan projects will take another
few quarters to begin execution. Therefore, the successful execution of its projects along with debt reduction and
working capital management will drive its growth as it enjoys a robust order book.
Oil India
Reliance Ind
Selan Exploration
Aurobindo Pharma
Oil & gas

Oil India has several hydrocarbon discoveries across reserves in Rajasthan and the north-eastern region of India.
The total proven and proven and probable reserves of the company stand at 473 million barrels (mmbbls) and
941mmbbls respectively. In addition to the huge oil reserves, the companys reserve-replacement ratio is quite
healthy at 1.6x, which implies a comfortable level of accretion of oil reserves through new discoveries. Further, it
offers healthy dividend yield, which provides comfort to investors. The full benefit of the recent policy reforms
like deregulation of diesel, gas price revision and DBT scheme for LPG consumers are expected to reflect in its
future earnings and add value, though weak global oil prices are likely to be an overhang on the stock for some
time.
Reliance Industries has one of the largest and complex refining businesses in India which enjoys a substantially higher
refining margin over the benchmark GRM. Further, its petrochemical business is also highly efficient while the
prospects for its E&P business remains bright, though currently it remains depressed. We expect the GRM to remain
healthy and the petrochem margin to be maintained in the medium term on an uptick in the domestic demand.
Currently, the decline in gas output from the KG-D6 basin is weighing on the stock price; however, incremental
capacity in the petchem business would be the earnings driver in the coming years. Large investment in Reliance Jio
could add value in long term.
Selan Exploration Technology is an oil E&P company with five oil fields in the oil-rich Cambay Basin of Gujarat.
The initiatives taken to monetise the oil reserves in its Bakrol and Lohar oil fields are likely to improve production.
Further, it intends to explore its next field, Indrora, which is the most prolific one with significant reserves. Based
on this, we expect it to ramp up production significantly, subject to approval for the new wells. We expect
production ramp-up in FY16 and hence we expect the earnings to grow significantly in the next two to three years.
However, weak global oil prices are likely to be an overhang on the stock in the medium term.
Pharmaceuticals
Aurobindo Pharma is set to post a healthy growth on the back of a ramp-up in the US and European markets,
thanks to a strong product pipeline built over a period and focus on niche segments like injectibles, hormones,
penems and sterile products. The expected increase in the export-led business and a favourable tilt in the revenue
mix are likely to boost the margin, resulting in a faster growth in the earnings as compared with the revenues. It
has recently acquired the commercial operations (revenue size EUR320mn) of Actavis Plc in seven western European
countries and of Natrol in the USA to take on the nutraceutical business, which is a strategic fit.
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Cadila
Cadila Healthcares performance in the US generic vertical is likely to improve on the back of new product
approvals. Besides, its consumer business and exports to the emerging markets will help it to achieve a superior
growth. It got DCGI approval for its first NCE called Lipaglyn to treat type-II diabetes; this will add value to its
R&D pipeline.
Cipla
Cipla has brought about a paradigm shift in its business strategy. To revive growth, it has (1) enhanced focus on
technology-intensive products in the inhalation and nasal spray segments; (2) established front-end presence in the
key markets like South Africa, USA and Europe; (3) developed an appetite for inorganic expansions; and (4)
invested in future growth areas like biosimilars. Though the rationalisation of products and creation of front-end
presence in the key markets would hurt earnings in the short term, but the base business would continue to grow
steadily. The growth would be fast-tracked on the back of the launch of combination inhalers in Europe, ramp-up
in generics in the USA and synergy from consolidation.
Divis Labs
The DSN SEZ facility at Vishakhapatnam that started in June 2011 augurs well for Divis Laboratories. The
company is likely to see an improvement in economies of scale which will also lead to tax benefits after USFDA
approvals for three additional production blocks. A near debt-free balance sheet and strong cash flow are likely to
help build a war chest for pursuing strategic investments (biosimilars) and exploit the growth opportunities in
niche segments, like oncology and steroids for contraceptives. The company has planned to set up a new facility at
Vishakhapatnam with an initial investment of Rs500 crore; it will start contributing revenues from H2FY17.
Glenmark Pharma
Glenmark Pharmaceuticals exhibited a weaker operating performance during H1FY16 due to adverse economic
scenario in the key emerging markets including Russia and a fewer number of product approvals in the USA.
However, the management has given a revenue growth guidance of 18-20% for FY16 (vs 11% in FY15) and an
EBITDA guidance of Rs1,750 crore for the same period (vs Rs1,359 crore in FY15; a Y-o-Y growth of 30%). The
growth would be mainly driven by the US and Latin American markets, which are witnessing exponential growth.
The companys focus on innovation augers well as evident from the fact that it received over $200 million as initial
milestone payment on out-licensing of partly developed molecules in a span of nine years. Currently, it has three
new chemical entities and four new biological entities in clinical trials, out-licensing potential.
Ipca Lab
Ipca Laboratories has successfully capitalised on its inherent strength of producing low-cost drugs to tap the
export markets. But, it has recently got an import alert from USFDA for its Ratlam API facility and the formulation
facility at Indore SEZ. While the overhang related to the USFDA ban is unlikely to ease in near term, a respite is
expected from the shipment of two products to the US market, namely hydroxychloroquine sulfate and propranolol
hydrochloride (exempted from the import ban), and a clearance on its Ratlam facility by the WHO. This will help
the company to resume a significant portion of the institutional business. The management has guided for a
moderate growth outlook (revenue growth of 10% and EBIDTA margin of 17-18%) for FY16.
Lupin
The expected ramp-up in the launch of oral contraceptives, ophthalmic products, branded franchise (with addition
of in-licenced product-Alinia, Inspira Chamber VHC and Locoid lotion) in the USA and a robust pipeline of new
launches in the domestic and overseas markets provide strong growth visibility for Lupin. Further, with an expanded
field force and therapy focused marketing division, its formulation business in the domestic market has been
performing better than the industry. The deal with Eli-Lilly to distribute human insulin would open an incremental
revenue stream for Lupin in the Indian market.
Sun Pharma
The combination of Sun Pharma, Taro, Dusa Pharma, the generic business of URL Pharma and the recently
acquired Ranbaxy offers an excellent business model for Sun Phaarma. However, the integration process with
Ranbaxy is set to affect the profitability in short term. Also, the USFDAs adverse observation report (Form-483)
on its Halol (Gujarat) facility creates a major overhang. However, the management maintains its aim to achieve a
$250-mn synergy from the merger of Ranbaxy by FY18. With a strong cash balance, it is well positioned to
capitalise on the growth opportunities and inorganic initiatives.
Torrent Pharma
Grasim
The Ramco Cements
A well-known name in the domestic formulation market, Torrent Pharmaceuticals has been investing in expanding
its international presence. With the investment phase now over, it should start gaining from its international
operations in the USA, Russia and Brazil. Better field force productivity, focus on developed market and stronger
balance sheet would result in a sustainable earnings growth. It has recently acquired 30 key brands of Elder
Pharma for Rs2,000 crore which is a strategic fit in long run. The company has proposed to raise funds up to
Rs10,000 crore through a mix of equity and debt instruments, part of which may be used for inorganic initiatives.
Building materials
Grasim is better placed compared with the other large players in the cement space due to its strong balance sheet, comfortable
debt/equity ratio, attractive valuation and diversified business. The demand for VSF products remains strong in the global
market and Grasim being a leading domestic player is well placed to capture the incremental demand. However, a slowdown
in demand for VSF and cement may affect the near-term earnings. The long-term outlook for the company remains intact.
The Ramco Cements, one of the most cost-efficient cement producers in India, will benefit from the capacity addition
carried out ahead of its peers in the southern region. The 3mtpa expansion will provide the much-needed volume
growth in the future. The regional demand remains lacklustre but on account of the improvement in the realisation
due to supply discipline and a likely change in the market mix its profitability will improve (marginally) in FY16.
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Shree Cement
Shree Cements cement grinding capacity has grown to 18.2mtpa which will support its volume growth in the
coming years. It has a power plant with capacity of 300MW entirely for merchant sale which is expected to
support its revenue growth going ahead. Thus, a volume growth of the cement division and the additional revenue
accruing from the sale of surplus power will drive the earnings of the company.
UltraTech Cement
UltraTech Cement is Indias largest cement company with approximately 62mtpa cement capacity. It has benefited
from an improvement in its market mix. Further, the ramping-up of the new capacity and savings accruing from
the new captive power plants will improve its cost efficiency.
Discretionary consumption
Century Plyboard Century Plyboard is a leading player in the organised plywood industry with a market share of 25%. A strong growth
in the sector, Centurys premium positioning and brand equity strength, and the impending GST roll-out would enable
it to post a revenue growth (CAGR) of 16.5% over FY14-17. On the back of a revenue growth and better absorption
of fixed costs, the earnings are likely to grow at a much stronger rate of 25% CAGR over FY14-17. It is a quality
consumer play in a niche growing segment. Its robust return ratios and strong growth potential make us positive on
the stock. We have a Buy rating on it with a price target of Rs260.
Cox & Kings:
Cox & Kings is an integrated player with a strong presence in the global leisure travel segment and the education
tourism segment in Europe. It has 30% market share in the global outbound tourism market and a market leader
in education tourism in the UK. An improving global macro environment (conducive to travel & tourism industry)
and the companys focus on de-leveraging its balance sheet will help it to achieve a double-digit earnings growth
in the medium term. Hence, we recommend a Buy on it with a price target of Rs300.
Info Edge (India)
Info Edge is Indias premier online classified company in the recruitment, matrimony, real estate, education and
related service sectors. Naukri is a quality play on the improving macro environment and is directly related to the
GDP growth and Internet/mobile penetration. Thus, it can grow consistently at over 20% for the next few years.
We expect Zomato business growth to extend in the coming years, with better integration of services and increasing
monetisation opportunities. Zomatos online ordering services are currently available for around 12,000 restaurant
partners and it expects to take the count to more than 20,000 in FY2016. Going ahead, other investee ventures,
like www.meritnation.com, www.policybazaar.com, www.mydala.com and www.canvera.com, are also likely to
gain from the ongoing e-commerce boom in India.
INOX Leisure
INOX Leisure Ltd (ILL), Indias second largest multiplex operator with 101 properties and 393 screens across 55
cities accounting for about 23% of the multiplex screens in India, is scripting a blockbuster growth story through
a mix of inorganic and organic expansion plan to scale up the total screen count to 565-570 screens over the next
24-30 months. The ILL mega show is supported by an improving content quality in the Indian mainstream and
regional cinema with its movies regularly hitting the Rs100-crore or Rs200-crore box-office collection mark. We
believe ILL with its strong brand and extended reach is well poised to leverage the opportunity in Indias underpenetrated multiplex sector.
KKCL
Kewal Kiran Clothing is a branded apparel play with four brands in its kitty. Killer, its flagship denim brand, has
created a niche space in the minds of consumers. With a gross market turnover of over Rs300 crore, Killer is ahead
of its rival, Spykar. A strong brand profile, a disciplined management and a consistent track record coupled with
a robust balance sheet make us positive on the company.
KKDL
KKDL Ltd (erstwhile Kamala Dials and Devices) is present in the watch manufacturing business and has a strong
presence in the luxury watches retail business through subsidiary, Ethos. The watch business generates steady revenues
and cash flow with minimal capex, as no capacity is likely to come on stream and the utilisation levels are expected
to improve. The high-end retail watch business Ethos provides a strong growth opportunity in terms of revenue
growth via its online venture wherein it generates leads that translate into lower customer acquisition cost and better
fixed cost management that would result in robust margin improvement and strong profit growth. This unique highgrowth potential business along with the steady manufacturing business that generates free cash is attractively priced
currently and offers significant returns over the medium to long term. We put a Buy rating on the stock, valuing it
using the SOTP method (the manufacturing vertical is valued at 6x FY17E earnings + the high-end Ethos is valued
at 1.1x FY17E sales) to arrive at a price target of Rs375.
Orbit exports
Orbit Exports (Orbit) is a leading manufacturer and exporter of novelty fabrics exporting its products to over 32
countries. It is a recognised star export house and operates in the niche area of high-end fancy fabrics, which are mainly
used by designers in womens fashion apparels. A strong OPM profile has enabled it to earn higher returns averaging
at 21% in RoCE and at 33% in RoE over the last three years. Given the strong financials, niche capabilities and a
vigilant management, Orbit is well poised for a strong earnings growth. Hence, we expect its top line and bottom line
to grow at a CAGR of 19.6% and 22.8% respectively over FY15-18. Given the robust earnings potential and enviable
return ratios, Orbit is expected to trade at higher multiples. Thus, we expect the stock to get re-rated (in line with its
peers like Kitex Garments). We initiate coverage on Orbit with a Buy rating and value the company at 22x its FY2017E
earnings to arrive at a price target of Rs630.
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EARNINGS GUIDE
FUNDAMENTALS
Remarks
Raymond
Raymond is present in the fast-growing discretionary & lifestyle category of branded textiles and apparels. With
growing incomes, rise in aspirations to lead a luxurious life, greater discretionary spending and favourable
demographics, the segment of branded apparels & fabrics presents a good growth opportunity and Raymond with
its brands and superior distribution set-up is very well geared to encash the same. Any development with regard to
the Thane land in the form of either joint development or disposal would lead to value unlocking and provide
significant cash to the company.
Relaxo Footwear Relaxo Footwear is present in the fast-growing footwear category, wherein it caters to customers with its four topof-the-mind-recall brands, viz, Hawaii, Sparx, Flite and Schoolmate. It has emerged as an attractive investment
opportunity due to its growing scale, strong brand positioning and healthy financial performance.
Speciality Rest.
Speciality Restaurants is a leading player in the fine-dining space with a portfolio of well-established brands such
as Mainland China and Sigree. It is a good proxy on the Indian consumption story as several factors such as
demographics, increasing disposable income and the trend of nuclear families are playing in its favour. Given the
slow pace of growth of consumer discretionary spending and pressure on the operating profit margin due to the
addition of new stores, we maintain our Hold rating on the stock.
Thomas Cook (I) Thomas Cook India Ltd (TCIL), owned by the legendary value investor Prem Watsa, is an integrated leisure travel
and human service management company in India. The improvement in the domestic and global macro environments
provides a huge growth opportunity in the Indian leisure and travel industry. Quess Corp (its human resource
management business) provides exposure to the fast growing HR, office management and technology solutions
business. Moreover, we see a turn-around in the financial performance of Sterling. The recent stock price correction
coupled with the improving financial health of Sterling Resorts, visibility in Quess Corp business and expansion in
the OPM and earnings, provide an opportunity to re-enter the stock. Hence, we maintain Buy with a price target
of Rs265.
Wonderla Holidays
Wonderla Holidays Ltd (WHL) is the largest amusement park company in India with over a decade of successful
and profitable operations. It owns and operates two amusement parks under the brand name Wonderla in Kochi
and Bengaluru, and is coming up with a third park in Hyderabad (to be operational by Q1FY17). With a steady
improvement in footfalls, the Hyderabad park getting operational in Q1FY17, a strong growth in the non-ticket
revenues (F&B and product sales) and an 8-10% increase in the annual ticket price, WHLs revenues are expected
to grow at a CAGR of 30% over FY15-18. Its OPM of 44-45% is better compared with some of the mature
international parks.
Zee Entertainment
Zee Entertainment Enterprises, part of the Essel group, is one of India's leading TV media and entertainment
companies. It has a bouquet of more than 34 channels across Hindi, regional, sports and lifestyle genres. For FY16,
the management has indicated that the margin profile will be maintained at around 25.7% 25%. The management
also indicates a better operating environment in terms of both advertisement revenues and subscription revenues. On
the advertisement side, the management expects to exceed the industrys low-teen growth in FY16. The subscription
revenue will also benefit from the phases III and IV of the digitisation process (will be more visible in FY17 and FY18).
Diversified/Miscellaneous
Aditya Birla Nuvo We like the strong positioning that Aditya Birla Nuvos businesses enjoy in their respective fields. It is amongst the
top five players in the insurance, asset management and telecom segments (Idea Cellular is the fastest growing telecom
company, third in ranking). Madura Garments, with its marquee brands, and consistent and resilient growth, is a
profitable set-up. In an improving macro-economic environment the company would be well placed to grow.
Bajaj Holdings
Bajaj Holdings & Investment Ltd (BHIL, erstwhile Bajaj Auto) was demerged in December 2007, whereby its
manufacturing business was transferred to the new Bajaj Auto Ltd (BAL) and its strategic business consisting of the
wind farm and financial services businesses was vested with Bajaj FinServ (BFS). All the businesses and properties,
assets, investments and liabilities of erstwhile Bajaj Auto, other than the manufacturing and strategic ones, now remain
with BHIL. BHIL is a primary investment company focused on new business opportunities. It holds more than 30%
stake each in BAL and BFS. We have a Buy recommendation on the stock with a price target of Rs1,815.
Bharti Airtel
Bharti Airtel is the leader in the Indian mobile telephony space. With the regulatory overhang receding and the industry
as well as the company focusing on the quality of revenues rather than volume, better times can be expected ahead
for the sector and hence the company. We remain optimistic about the company.
BEL
Bharat Electronics, a PSU manufacturing electronic, communication and defence equipment, stands to benefit from
the enhanced budgetary outlay for strengthening and modernising the countrys security. The Make in India
initiative of the government will support the earnings growth in the coming years, as it is the only player with strong
research and manufacturing units across the country. The companys current order book of around Rs21,648 crore
provides revenue visibility for the next three to four years.
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December 2015
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FUNDAMENTALS
GDL
Max India
EARNINGS GUIDE
With its dominant presence in the container freight station segment and recent forays into the rail freight and cold
chain businesses, Gateway Distriparks has evolved as an integrated logistic player. Its CFS business is a cash cow
while its investments in the rail and cold storage businesses have started bearing fruits. It is one of the largest
players in the CFS business and has also evolved as the largest player in the rail freight business as well as the cold
storage business. The proposed capex for all the three segments will strengthen its presence in each of the segments
and increase its pan-India presence. We expect its revenues and net profit to grow at 20% and 16% CAGR
respectively over FY13-15.
Max India is a unique investment opportunity providing direct exposure to two sunrise industries of insurance
and healthcare services. Max New York Life, its life insurance subsidiary, is among the leading private sector
players, has gained the critical mass and enjoys some of the best operating parameters in the industry. As the
insurance sector is showing signs of stablisation, the companys favourable product mix and a strong distribution
channel will result in a healthy growth in the annual premium equivalent. The company has turned profitable on
a consolidated basis and has announced dividend in past couple of years.
Ratnamani Metals Ratnamani Metals & Tubes is the largest stainless steel tube and pipe maker in India. In spite of the challenging business
environment due to increasing competition, the stock is attractively valued. The management has maintained a strong
outlook on the potential opportunities in the oil & gas sector and inter-connection of the rivers across the country.
Supreme Ind
Supreme Industries is a leading manufacturer of plastic products with a significant presence across piping, packaging,
industrial and consumer segments. We remain positive on its new launches of value-added products and capacity
expansion plans. However, the recent volatility in the prices of its raw materials (mainly polymers) amid a highly
competitive environment is likely to limit the growth in the margin and volume offtake in the near term. Hence,
while we remain positive on its long-term structural story, we downgrade our rating to Hold from Buy with a
revised price target of Rs677.
UPL
A leading global producer of crop protection products, intermediates, specialty chemicals and other industrial
chemicals, United Phosphorus has presence across value-added agricultural inputs ranging from seeds to crop
protection products and post-harvest activities. A diversified geography and the recent acquisition of DVA Agro
Brazil will help the company to have a strong presence in the Brazilian market and aid in inorganic growth. Its
revenues are likely to grow at 12-15% and EBIDTA margin is expected to remain at 18-20% in FY16. It has also
started to focus on premium products in agro-chemicals and will slowly stop selling commodities and low-margin
products. It has also started to focus on selling premium products and maintaining a strong balance sheet.
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From Sharekhans Desk

RESEARCH BASED EQUITY PRODUCTS

ProPrime - Diversified Equity 32

Top SIP Fund Picks

MUTUAL FUNDS DESK

STOCK IDEAS STANDING (AS ON DECEMBER 03, 2015)

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from sharekhans desk

FROM SHAREKHANS DESK

2015: Win some; lose some

SHAREKHAN TOP PICKS

SHAREKHAN TOP PICKS

Sharekhan Top Picks

earlier in the month. Consequently, we had replaced DRL with Godrej

ABSOLUTE RETURNS (TOP PICKS VS BENCHMARK INDICES)

CONSTANTLY BEATING NIFTY AND SENSEX (CUMULATIVE RETURNS) SINCE

SHAREKHAN TOP PICKS

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investment in a weak demand environment.

SHAREKHAN TOP PICKS

WEALTH CREATOR PORTFOLIO

WEALTH CREATOR PORTFOLIO

NOVEMBER 30, 2015

Wealth Creator portfolio

Portfolio performance review

In addition to some bottom-up picks, the portfolio contains stocks

Policy push: Stocks from sectors benefiting from improvement

Wealth Creator folio has appreciated by 9% (weighted average

Early gainers: Beneficiaries of an economic recovery (stocks from

Evergreen: Steady performers that provide stable and consistent

Returns (as on on November 30, 2015)

Wealth Creator folio (weighted average returns)

Reco price (Rs)

Price target (Rs)

Large-caps (64% weightage; 8% each))

Larsen & Toubro

State Bank of India

Tata Consultancy Services

Tata Motors DVR

PTC India Financials

Mid-caps (36% weightage; 4% each)

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NSE volume (no. of shares):

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NSE volume (no. of shares):

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CENTURY PLYBOARDS (INDIA)

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Management comments: The management continued to acknowledge the soft demand

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